(5 years, 7 months ago)
Commons ChamberI have made it very clear, as have the Government, over a long period of time—at least since 2016 when these measures were first brought into effect, which is before I arrived in my current position—that our policy is our policy and that we will not change that policy. For those who have been involved in this form of aggressive and contrived tax avoidance, the recommendation is very clear: the best thing to do is to speak to Her Majesty’s Revenue and Customs and come to a sensible and reasonable arrangement for repayment.
I understand the Minister’s sincere desire to tackle disguised remuneration and thank him for always being available to discuss my constituents’ concerns. However, something has clearly gone very wrong with the operation of the loan charge and now, too, I fear with the roll-out of IR35 to the private sector. Will the Minister commit please to pause both the loan charge and the roll-out of IR35 to the private sector until my constituents’ concerns have been fully addressed?
IR35 is often raised in the context of the loan charge, but it is a completely unrelated matter. IR35 is about making sure that those who are effectively employed by other businesses are treated as employees for tax purposes, and that is only right and proper. The loan charge is about putting right the situation of this aggressive tax avoidance.
(5 years, 10 months ago)
Commons ChamberIt is a pleasure to respond to the hon. Member for Oxford East (Anneliese Dodds), my right hon. Friend the Member for Loughborough (Nicky Morgan) and the hon. Member for Glasgow Central (Alison Thewliss). By the end of this process, we will have discussed 53 SIs for the financial services in 30 discrete debates. In each one of them, there are some common themes to the remarks. I appreciate that this is not a desirable process to go through, but it is a unique process. It is a process that we have responsibility for at this time, but I hope that we will not need to use or to rely on its outcomes. None the less, this SI is needed to ensure that we do have a robust and functioning legislative framework for financial services regulation after exit. I am determined that I will, to the best of my ability as a junior Treasury Minister, deliver this programme of SIs.
Hon. Members have raised a number of specific points, which I will now address. The hon. Member for Oxford East asked why we have chosen to transfer powers to the FCA. This is consistent with our overall approach to onshoring. Only existing EU functions are being transferred to UK regulators, apart from the temporary transitional tool. I have written to the hon. Lady with a full explanation of the consolidated text, and I will send that explanation to her shortly in addition to the other replies that I have given to her.
In response to the point made by my right hon. Friend the Member for Loughborough, in practice there is a logistical challenge in putting everything together, conducting multiple streams of consultations simultaneously and delivering in each discrete area what is required as a fix for the undesirable outcome of no deal. Despite the enormous effort by my officials in the Treasury to get this right, it would have been very challenging to set out the architecture proactively from the outset. This FSMA SI makes many consequential amendments that were needed to follow on from previous SIs, which is why it was set out late. How the FCA will use these powers will be set out later this week, providing a lot more clarity on that matter.
The hon. Member for Oxford East asked about insurance business transfer. We consulted the insurance sector on these business transfer transitionals, and it confirmed that this was the right approach and helped to develop the provisions. We have worked collaboratively with different industry sector representatives throughout.
The hon. Member for Glasgow Central raised a specific legal point—a dispute about the wording. I will have to look at the matter and write to her. In the round, we have used TheCityUK as a convening trade association to bring relevant bodies together, and it has been very thorough in its work. The regulators are already consulting the industry, and firms have responded positively. The regulators, including the Prudential Regulation Authority, will shortly be setting out the outcome of those consultations. I think that I have covered the point raised about the consolidated Bill.
I acknowledge that FSMA is an important part of the UK’s framework for financial services regulation, but amending FSMA using secondary legislation is standard and happens several times a year. I accept the remarks of the hon. Member for Glasgow Central concerning the unusual nature of this—it is necessarily so because of what we are trying to do to prepare for a no-deal situation—but EU directives have been implemented using secondary legislation since the UK joined the EU. For financial services, that has often involved amending FSMA. Parliament approved the secondary legislation powers in FSMA itself to task the Treasury with keeping the FSMA regime up to date, such as the power to amend the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001.
Let me turn to the points made by my right hon. Friend the Member for Loughborough, who chairs the Treasury Committee. I welcome the opportunity to be scrutinised many times by her Select Committee. Regarding the methodology for calculating the familiarisation costs, there is a cross-governmental set of guidance from the Cabinet Office, but I will write to my right hon. Friend with specific details. Clearly, the cost per word varies but we have a method for describing that across Government, and we have used that method. We have drawn on the better regulation guidance and we have consulted on the impact assessment across Government.
My right hon. Friend asked whether the Government will provide regulators with powers to make the commencement of cliff-edge risks consistent. This is exactly what the temporary transitional power is for: the regulators will be able to phase in the vast majority of changes consistently. I said before the Select Committee that it would be important to lay any directions in the House of Commons Library and the House of Lords Library, and that I would ensure that the Treasury Committee was notified.
The hon. Member for Oxford East mentioned the point made by Lord Lexden. Lord Lexden used to work with me at the Conservative Research Department, and he was always very good at picking out errors. I shall look carefully at his remarks and see whether there is an appropriate response.
The hon. Member for Glasgow Central raised the issue of charging fees and the powers given to the regulator. The fee-setting powers and controls in this instrument reflect the existing powers that the regulators have in legislation. There is no meaningful change in the powers; the extension is consistent with the current role of the regulators. The hon. Lady also asked why the House has not been given enough time properly to scrutinise this legislation. I respectfully say that we have done as much as we can in the time available. We have engaged constructively with firms and we published these SIs well in advance of laying them before the House. It has been a significant iterative process. I do not describe it as a perfect process, but it has been quite thorough.
Overall, this SI will ensure that we have the necessary functions and powers in the Treasury and in our regulators in the event that the UK leaves the EU without a deal or an implementation period. This has been a tough process. I pay tribute to my opposite numbers on the Opposition Front Benches.
I recognise that my hon. Friend is doing valiant work, but does he acknowledge that this process of moving to a new regime is proving extremely unsettling for players in the financial services sector? A recent report by Ernst & Young estimates that £800 billion-worth of assets and people have moved to other jurisdictions since the referendum as a consequence of our decision to move to a precarious, patchy and one-sided regime of equivalence that is a very poor substitute for our current system of passporting. What assessment has he made of news from the Amsterdam regulator last week that it is boosting the resources of the Dutch Authority for the Financial Markets by 10% to cope with the additional work that it is receiving as a result of our painful decisions?
The process that we have gone through with these no-deal SIs has been as thorough as possible in the circumstances. My hon. Friend is making a wider point about the desirability of being in this situation and the need actually to secure deal. During the implementation period, we will have maximum opportunity to determine the method for securing equivalence, which we envisage would be by June next year. I recognise that there is uncertainty, but despite some pretty grim suggestions over what would happen with jobs, the City of London is resilient. Although it has made contingency arrangements, as would be expected, we have not seen large numbers of jobs drain away from the City as some would have anticipated. We need to secure the deal and then work through the issues with regard to the implementation period.
I pay tribute to the work of the hon. Members for Oxford East and for Glasgow Central, and the scrutiny of the Select Committee, throughout this process. I know that we still have a number of SI debates to go, with two on Wednesday and several more next week, but I hope that I have explained the rationale for this particular SI and that the House will be able to support these regulations.
Question put and agreed to.
Resolved,
That the draft Financial Services and Markets Act 2000 (Amendment) (EU Exit) Regulations 2019, which were laid before this House on 31 January, be approved.
(6 years ago)
Commons ChamberFollowing on from the Budget, we have a series of measures to assist credit unions to expand their role in delivering affordable credit across communities. We have a scheme of work over the next three months to pilot interest-free loans and prize-linked saving schemes, to help credit unions to grow as they have been doing in recent years.
What do the Government make of the Centre for European Reform’s report this week that warned of a 60% fall in UK financial services exports to the EU in the event that we lose access to the single market and put a free trade agreement in its place?
(6 years ago)
Commons ChamberMy hon. Friend is exactly right. One of the huge benefits of the negotiated deal that is in front of the House is the transition period, giving us another two years, to the end of 2020, of clarity and certainty for British businesses about how they will operate in the future.
Let me be clear about the economic benefits of this deal: a time-limited implementation period, as I have just said, giving people and businesses time to adjust; a deal that ensures citizens, both British and European, are properly protected; a political agreement to construct the closest economic relationship between the EU and any advanced economy in the world; a free-trade area for goods with no tariffs, no fees, no charges, and no quantitative restrictions; a commitment to an ambitious relationship on services and investment, including financial services; and for further co-operation across a wide-range of sectors from transport to energy and data.
I am very grateful to my right hon. Friend for giving way. He mentioned financial services and the impact of any Norway-style arrangement on the sector. Does he not also acknowledge that the proposed deal that the Government are putting forward is not great for financial services by any means? The sector obviously employs many of my constituents in Orpington who come into London every day to work in the City in all manner of roles. I have read the Government’s economic analysis and it shows that, over the relevant forecasting period, the financial services sector will be hit by around 6% to the effect that our trade will be 6% smaller than it would otherwise be. That is a meaningful hit to one of our most competitive industries, and we do not have many globally competitive sectors, so it baffles me why we would willingly do that.
I wish to make one further point if I may and ask another question. The agreement that the Government are putting forward will mean that we will no longer have any direct influence on the EU’s rule making with respect to financial services. It is therefore all the more important that we maintain our ability to play a full part in representing the UK’s interests in global bodies such as the Basel Committee and the International Organisation of Securities Commissions. Article 219 says that we will have to follow the EU’s position on all those bodies. [Interruption.]
I think the House has captured what Jack Straw used to call the gra-vah-men of the hon. Gentleman’s point. I prefer the pronunciation gra-va-men, but there you go.
(6 years, 1 month ago)
Westminster HallWestminster Hall is an alternative Chamber for MPs to hold debates, named after the adjoining Westminster Hall.
Each debate is chaired by an MP from the Panel of Chairs, rather than the Speaker or Deputy Speaker. A Government Minister will give the final speech, and no votes may be called on the debate topic.
This information is provided by Parallel Parliament and does not comprise part of the offical record
The Minister will have heard my hon. Friend’s point, which I endorse.
The loan charge should apply from Royal Assent onwards. In other words, it should be prospective—a case I have made many times—not retroactive or retrospective. HMRC should be more proactive in advising that such schemes are likely to end in tax charges in the future, and perhaps far into the future. More steps should be taken against promoters and introducers of such schemes. They are the ones profiting from this misery. Finally, the issue of employment status and IR35 requires action at last, to bring the uncertainty to an end.
My hon. Friend wants further action taken against the promoters of these schemes. Does he agree that we also need to take action against the Queen’s counsel who peddled rinky-dink advice that encouraged many of our constituents—including some of mine—to participate in these schemes, in the belief that a QC’s opinion rendered them beyond the reach of HMRC?
My hon. Friend makes a very good point. I hesitate to trespass far beyond my expertise, but I make the point that it is often thought that the opinion of a QC determines the truth. That is not the case. QCs and barristers argue among themselves in court, and the court determines the facts. I am often struck by people relying on the opinions of lawyers when what they actually need is the judgment of a court.
Let me make some more progress or, despite the time I have, I will not get to the end of my speech and I want to address the points raised.
Anyone who has been involved in legal action will be well aware that it can be protracted and expensive for all concerned. Agreeing a settlement with HMRC allows taxpayers to move on, and out of avoidance for good. In most cases, any users of schemes will be better off approaching HMRC and agreeing a settlement rather than waiting for the charge next April, and HMRC is encouraging anyone worried about being able to pay to get in touch as soon as possible.
On the point about taxpayers wanting to move on, several of my constituents have requested settlement sums from HMRC but have not received a response, notwithstanding the passage of several months. That is prolonging their uncertainty and anxiety. Will the Minister take steps to ensure that HMRC responds to those requests for settlement as rapidly as possible?
I certainly will. I took the precaution of speaking to the Financial Secretary again this morning, and I would like to clarify that, with the time-to-pay arrangements, the five-year period will automatically be put in place for those with incomes of less than £50,000. For those with larger incomes, there is an opportunity for dialogue with HMRC. With respect to individuals who have not had that settlement made known, I will be happy, as we all will as constituency MPs, to take those cases up with HMRC.
HMRC is helping thousands of scheme users to get out of avoidance for good.
(6 years, 1 month ago)
Commons ChamberI have arrived late to the debate, relatively speaking, having been detained by the trains in my previous role.
I wish briefly to address amendment 14, tabled by the hon. Member for Streatham (Chuka Umunna). We stand at a critical moment in our nation’s post-war history, and the decisions we take in the next few days and weeks will shape not just what happens over the next few months and years but our entire lifetimes. It is vital that we take these decisions in full possession of the facts and that we are answering the right questions. I believe amendment 14 will help us to do exactly that.
The Government are attempting to frame the choice before us in a binary way: the Prime Minister’s deal or no deal at all, which is effectively vassalage as rule takers on the one hand, or chaos and disruption on the other. As I said in my resignation letter last week, I believe that to present the country with this narrow choice represents the single greatest failure of British statecraft since the Suez crisis in the 1950s, for neither choice is in the national interest. Amendment 14 rightly seeks to expose this for what it is and will make clear everything to full public scrutiny. Both options—deal and no deal—are significantly worse for the UK than our present arrangements, and the amendment will make that clear by requiring the Government to be transparent.
Any serious appraisal of a major policy change needs to measure the costs and benefits against a clear economic baseline. Indeed, the Green Book—the Treasury manual on how to appraise policies, programmes and projects—states clearly that the Government’s preferred course of action must always be assessed against a “do nothing, business as usual” benchmark. If the business as usual option—in this case, staying in the EU—were not to be included in any such appraisal, the process would be contrary to the Government’s own manual, in addition to being clearly below the standard applied in any well-run business.
I am worried and concerned that it appears to have taken an amendment that the Government would have been in no position to overturn to secure their commitment that this full appraisal will eventually be published in time for it to be fully considered by Members of this House before the meaningful vote. Members need to know detailed information about this appraisal. We need to know the impact, region by region and sector by sector, because the impact, as hon. Members have made clear, will vary sharply around the country. We also need to know which groups in society will suffer the most, relative to other courses of action available to us as a country. I would be grateful if the Minister, in his winding-up speech, could confirm that that will form part of the appraisal that the Government publish and that the OBR will provide an independent assessment of the Government’s appraisal.
If we have learned anything from the chaos of the past 30 months, it is that facts are sacred. This debate has been characterised by falsehoods and misinformation from day one. It is extraordinary that we have now had to force the Government, at this relatively late stage, to publish the vital information necessary for an informed public debate. Some may say that this horse has long bolted, but I say it is better late than never. I believe that amendment 14 will go some way to righting this wrong.
Given that the reality of Brexit has proved to be so far from what was once promised during the campaign, the democratic thing to do is not just to accept amendment 14, as my hon. Friend the Minister has done, and to publish the like-for-like economic analysis showing how costly this Brexit will be, but to give the public the final say about whether they really want to proceed on this hopeless basis.
It is a pleasure to follow the hon. Member for Orpington (Joseph Johnson), who kindly spoke in favour of amendment 14. The amendment is in my name and in those of the right hon. Member for Broxtowe (Anna Soubry) and 70 other Members from all parts of the House. I want to take this opportunity to thank all the Members who have supported this amendment.
As the Minister said, what we were seeking to do with this amendment to clause 89—as he says, the clause allows the Government to make amendments to UK tax law—is to ensure that this House is provided with all the information needed for it to come to an informed decision. The Prime Minister made a very important admission last week, both outside No. 10 and in this House, where she moved on from the falsehood that has been peddled by too many, which is that this House has only two choices: the withdrawal agreement that has been presented by the Government, or leaving without an agreement at all. She moved on from that to the very clear choice that we now know faces this country: no Brexit, no deal or the agreement that the Government are putting forward. As may already have been said in this debate, this is arguably the biggest decision that this House will be making since the second world war, and it is absolutely vital that we are provided with the requisite data in order to come to an informed decision.
For the benefit of the record, our amendment seeks to make the exercise of the powers sought in clause 89, which the Minister mentioned, subject to the publication of a proper economic impact assessment of, and comparison between, each of the three scenarios the Prime Minister has set out before any meaningful vote on the withdrawal agreement takes place under the provisions of the European Union (Withdrawal) Act 2018. It is true, as the Minister said, that this Bill is likely to become an Act after the meaningful vote, but the amendment we have tabled is worded in such a way that its provisions will need to have been complied with before the meaningful vote in order for the powers under clause 89—to keep the tax system running in the event of no deal—to be usable.
I want very quickly to explain why we felt it was necessary to table this amendment and to deal with the three principal objections, which have been made in the House before, standing in the way of providing the information that this House needs to make a decision.
(8 years, 11 months ago)
General CommitteesIt is a pleasure to serve under your chairmanship, Mr Percy. I welcome the chance to set out the case for this statutory instrument, which details the higher education student support arrangements for the 2016-17 academic year. It is, as hon. Members said, an important instrument, and its provisions touch on some of the principles that guide the Government’s higher education policies.
The instrument includes an increase in loans for living costs for current full-time students, as well as a number of policy and technical changes to ensure that the student finance system remains fair. The most significant provision is the change to the student support package for new students, and I will devote the majority of my remarks to this.
Before discussing the content of the instrument, I would like to clarify the parliamentary process—an issue raised by a number of Opposition Members. Changes to student support are made annually through secondary legislation, through amendments to the Education (Student Support) Regulations 2011. There are a number of hon. Members here who are not able to vote in the Committee, but who have none the less made valuable contributions to this important debate, illustrating the fact that Parliament is having an opportunity to examine this measure.
These regulations are made under the Teaching and Higher Education Act 1998, which was passed under the previous Labour Government. Today’s Delegated Legislation Committee therefore follows the procedure agreed by Parliament. This debate follows an early-day motion in the Commons, and I understand that the other place will also get the chance to consider this instrument following the tabling of a motion yesterday by Lord Stevenson of Balmacara.
I share other Opposition Members’ respect for the Minister and I sense that he is in a dilemma because he is not entirely comfortable with this process. He is trying to justify it by saying that it is due custom and practice. He is absolutely right about that, but any Government have the ability to break due custom and practice. I know that only too well, because I sat in this House in 2006, when we had the great casino debate. That measure was obviously going to affect Blackpool and could have been brought to a Delegated Legislation Committee, but because of the strength of feeling on the matter in the House, the Government of the day allowed a 90-minute debate on the Floor of the House. If we can debate casinos on the Floor of the House for 90 minutes, why cannot we debate this issue?
I am glad that the hon. Gentleman acknowledges that we are following due custom and practice. I will carry on explaining the Government’s intentions in bringing this instrument before the Committee.
The instrument provides that those students beginning courses in 2016-17 will qualify for increased loans for their living costs while studying, instead of maintenance grants. An eligible student whose family income is £25,000 or less and who is living away from home and studying outside London will qualify for up to 10.3% more living costs support in 2016-17 than they would receive under current arrangements. That is an additional £766 of support, and that increase in support for living costs has been called for by individual students. Indeed, the 2012 report by the National Union of Students entitled “The Pound In Your Pocket” indicated that there are two main considerations for students when deciding whether to go to university. The first is whether they have the means to meet their costs when needed, and the second is whether the eventual benefits of higher education will outweigh the costs. With these regulations, we are ensuring that students from the most disadvantaged backgrounds have access to more support than ever before. Students understand the value of obtaining a degree.
I think that all the speeches so far, certainly from Opposition Members, have demonstrated clearly, as has the impact assessment, that this legislation will have a massively detrimental impact on social mobility. We understood that social mobility and aspiration were at the heart of the message that the Minister’s party wishes to put across; a party that claims to be a one nation Government. Does social mobility still feature in the Minister’s party’s claim to be a one nation Government?
Yes, indeed it does, and is motivating our decision to increase the amount of support that will be available to students going into higher education in this country. We want everybody who can benefit from higher education to be able to go to university.
We are delighted to see more people applying to university, more people getting in and more people getting on to their first-choice courses than ever before. Critically, we are delighted that more people from disadvantaged backgrounds are applying and going to university than ever before, and we want those trends to carry on.
Has the Minister seen the research on these new arrangements for the Institute for Fiscal Studies? The poorest 40% will graduate with debts of up to £53,000 a year, as opposed to £40,000 at the moment. How does that square with his party’s claim to be the party encouraging fiscal responsibility and social mobility?
Accessing university is a transformational experience for many students, especially for people from disadvantaged backgrounds. We want more people from disadvantaged backgrounds to go to university and receive the benefits that can bring. I will now explain exactly why—
I have come hot-foot from a delegation of students who came up from Somerset College in my constituency this morning, some getting on the train at 5 o’clock to meet me, because they knew I was on this Committee. I want to express their heartfelt concerns about the dropping of the maintenance grant and the switch to loans. They believe it will have a serious impact on people from low-earning backgrounds, particularly women, single-parent families and mature students—which they all are.
I fully understand that the Government want to get more people into further education and the concern about the debt that we were left by Labour. We would not even be discussing this if it were not for that and the deficit. Will the Minister assure me and those students that he has their concerns at heart and that we will still enable people from disadvantaged backgrounds to access further education?
My hon. Friend makes some points that I will now address head-on. Students understand the value of obtaining a degree. On average, graduates will earn £100,000 more than non-graduates over a lifetime. Because of the progressive nature—this is the vital point—of the student loan system, loans will start to be repaid only when students are earning more than £21,000. That means that the lowest earners will repay nothing.
As our equality analysis indicates, the grant-to-loan switch will only significantly affect students from low-income backgrounds whose annual average lifetime earnings are £30,000 or more. Critically and crucially, that is to say that only those who benefit from increased earnings as a result of undertaking higher education will be affected.
On that point, I have been approached by members of the student union of Petroc College in Barnstaple in my constituency. I also had a very constructive meeting with them over the summer. The point that the Minister is making goes to the heart of their concern, which is that the changes the Government are making might have the effect of lessening the opportunity for students from less well-off backgrounds to attend higher education. Could the Minister take this opportunity to provide some reassurance to that student union about the Government’s intentions?
The Minister has been very generous in giving way to interventions. Can we ensure that interventions are kept short and include a question from now on?
I shall briefly touch on that. Critically, just to repeat, what my hon. Friend’s students must remember is that the grant-to-loan switch will only significantly affect those whose annual average lifetime earnings are £30,000 or more. That should be a considerable comfort to his constituents.
The change to replace grants for living costs with loans was announced in principle at the July 2015 summer Budget. The change helps balance the need to ensure that affordability is not a barrier to higher education, while ensuring that higher education is funded in a fair and sustainable way. This was a manifesto commitment. It is there in black and white.
In the manifesto. Read it. It is available in all good bookshops.
Let me put the regulations in context to explain why the Government believe that they strike the right balance in ensuring these two things. In the previous Parliament, the Government took significant steps to ensure that university was open to those from all backgrounds. The policy of removing the artificial cap on student numbers, announced in the autumn statement 2013, reflected Lord Robbins’ principle from half a century ago that university places
“should be available for all those who are qualified by ability and attainment”.
Striking progress on social mobility through higher education has already been made. The proportion of students from disadvantaged backgrounds entering higher education is up from 13.6% in 2009 to 18.5% in 2015. That represents the highest proportion of students from those backgrounds entering higher education ever, and it is an achievement that we can all be proud of.
We are taking further steps on social mobility, as announced in our Green Paper. The Prime Minister has set out clear ambitions to double the proportion of the most disadvantaged students starting higher education by 2020 from 2009 levels, and to increase the number of black and minority ethnic students by 20% in the same period. We will be setting out further steps as part of our response to the Green Paper and through new guidance to the director of fair access.
I am going to press on, if the hon. Lady does not mind. As we enable more people to benefit from higher education, we must also ensure that the system remains financially sustainable. The higher education landscape has changed drastically since Robbins set out his principle. The overall higher education participation rate 50 years ago was around 5%, while it is now close to 50%. Despite the expansion in numbers, the evidence shows that graduates have continued to benefit as the demand for higher education and skills has grown in a more developed economy.
While respecting Robbins’ principle, the Government cannot fund higher education as if the changes of the past 50 years had not happened. Given the advantages accrued by those who go to university, it is not right to ask those who do not benefit directly to meet all the costs of those who do benefit from higher education.
I am on page 35 of the Conservative party’s 2015 manifesto. Amid all the information about repayment thresholds and the cap on numbers, there is no reference whatever to student grants.
The hon. Gentleman will see references to ensuring a sustainably funded higher education system balanced in the interests of the beneficiaries of the system and the taxpayers underwriting it. It is clear and transparent. It is in black and white.
It is right that graduates contribute towards the cost of their education while being protected from the costs upfront. That is what is delivered by the progressive system of taxpayer-backed student loans with generous repayment terms that we introduced during the previous Parliament.
I need to make some progress, I am afraid. I will allow my hon. Friend to intervene shortly.
The changes set out in this statutory instrument come at a time of increased resources going to universities. Total income has risen from £24 billion in 2012-13 to £26 billion in 2013-14, and is forecast to rise to £31 billion by 2017-18. Our system supports the financial sustainability of the sector while ensuring that higher education is open to all. As the OECD’s director of education put it, England is
“one of the very few countries that has figured out a sustainable approach to higher education financing”.
He recently added that England has
“made a wise choice — it works for individuals, it works for government.”
The Minister makes constant reference to what has happened in the past. We are concerned about the impact of these proposals, given that his own impact assessment—as my hon. Friend the Member for Blackpool South mentioned—identified that there would be a negative impact on a number of critical demographic segments. Is the Minister concerned about that? As he has not answered the question I raised previously, I will also ask him about the original equality impact assessment, which is not the one that has been published. It has been shared with the NUS. Will he make that available to Members of Parliament?
We published the full equality impact assessment on 5 December, which, in reference to the earlier comments made by the hon. Member for Blackpool South, gave the Committee plenty of time to analyse it and go through it closely before today’s meeting. The Government have been fully transparent with respect to the equality impact assessment.
On a point of order, Mr Percy. The Minister is playing with words in terms of 5 December. Actually, the date on the impact assessment is November, so obviously they got it out even later. The fact of the matter is that the membership of this Committee, with the exception of himself and myself, was drawn up only a few days ago, so how Members could be expected to know that they would need to look at it in December is another matter.
None the less, I repeat what I said, which is that we were accused of not publishing the equality impact assessment until a few days ago. We published it on 5 December online, and it has been available for all interested Members of Parliament to scrutinise.
These equality impact assessments were released to the NUS. The equality duty is an ongoing duty on Government, impact assessments are refined as new evidence emerges, and we published the most up-to-date version of it on 5 December. The Committee has had well over a month to assess that impact assessment. The changes to student support contained in the regulations work in the same spirit as the last Parliament’s reforms. The Government were elected on their fiscal record, with a commitment to eliminate the deficit. This change makes a significant contribution to achieving that goal. Converting maintenance grants to loans will generate grant savings of around £2.5 billion a year, which will have an immediate impact on the record-breaking deficit that this Government inherited. We do not recognise the estimates of the economic saving cited.
I am going to press on and conclude my remarks, because the shadow Minister needs to make his closing remarks, too.
Those who disagree with the provisions contained in the regulations should submit their proposals to generate equivalent grant savings from elsewhere. I note that the Labour party has in the past year proposed competing higher education funding policies, although they share one common feature—their significant cost to the taxpayer. Labour’s leader said in July that fees should be removed completely, with grants retained. That was costed by the Labour party itself at £10 billion. Ahead of the election, it was briefly proposed that fees be reduced to £6,000, which would have cost £3 billion. Those policies move us backwards. They are unsustainable.
I was therefore particularly interested to read Ed Balls’ comments in this week’s Times Higher Education, where he spoke about the “blot on Labour’s copybook”:
“We clearly didn’t find a sustainable way forward for the financing of higher education.”
He said that if the electorate
“think you’ve got the answers for the future, they’ll support you.”
We have set out a clear plan for the future to ensure that higher education finances are sustainable and that more people can benefit from higher education. Has the Labour party decided on its approach?
When the tuition fee reforms were made in the last Parliament, there were those who predicted a sharp fall in participation in higher education, particularly by those from disadvantaged backgrounds. However, that did not come to pass, and the latest application figures from UCAS, although provisional, show that, in spite of our proposed changes to maintenance, application figures are similar to last year’s figures.
The hon. Member for Blackpool South referred to the grant-to-loan switch in FE. Loans were introduced in the further education sector in 2013-14 to remove the barrier of meeting the upfront cost of tuition fees; we are debating loans for living costs in HE, and I do not believe that is a valid comparison.
I have only one or two minutes, so I will not give way. We should remember that switching support for living costs from grants to loans allows us to increase the upfront support provided to students from the lowest income backgrounds. In taking the decision to proceed with this policy, the Secretary of State and I considered an equality impact assessment, which we have published. That impact assessment sets out the risk to protected groups. It also explains that those risks will be mitigated by a number of factors, including the 10.3% increase to the maximum loan for living costs for the lowest income students, the repayment protection for low-income, low-earning graduates and the high average returns to higher education.
We will, of course, monitor the outcome of the policy through the data available from the Higher Education Statistics Agency and the Student Loans Company and the work of the Office for Fair Access. We will also continue to listen to stakeholders and colleagues in the House and the other place. In the meantime, I am grateful for the points that have been made by hon. Members today. However, the evidence from the coalition’s fee reforms has been that participation is fairly insensitive to greater debt. The equality analysis made the point that such changes have a
“limited impact on students decision making”.
Students understand that graduate debt is not the same as commercial debt. Graduate debt is paid back through a repayment system that takes account of ability to pay and, crucially, it allows individuals to make one of the best investments—in undertaking higher education.
The instrument allows us, in a time of fiscal restraint, to ensure that universities remain well funded so that they can continue to act as engines of our economy and of social mobility in a time of increased student numbers. For those reasons, I commend the regulations to the House.
(12 years, 5 months ago)
Commons ChamberThat is an interesting and valid point, and one that I had not intended to make myself. I look forward to hearing my hon. Friend’s views in more detail.
Having spoken to my hon. Friend the Member for Chichester (Mr Tyrie), the Chairman of the Treasury Committee, in a private capacity, I think that he would be content for the Committee not to have a statutory veto, but merely to be consulted and to have an advisory role in the Governor’s appointment. I think it important for his private views also to be reflected in the debate.
I am grateful for the opportunity to hear the private views of my hon. Friend the Member for Chichester (Mr Tyrie), but as he is not present to justify them, it would be wrong for me to comment on them. I will say, however, that if those are indeed his private views, I am surprised that he supports this Bill. The Committee is already able to attend pre-commencement hearings with appointees to the Monetary Policy Committee and will be able to do the same in future with appointees to the Financial Policy Committee. Obviously that could potentially involve agreement with the Government.
Let me return to the issue of the independence of both the person and the institution of the Governor of the Bank of England from the Treasury Committee.
I congratulate the hon. Member for Hayes and Harlington (John McDonnell) on his extraordinary luck in topping the private Members’ ballot not once but twice, and on choosing this important subject from among the many that must have competed for his attention.
The Bill, which requires the Treasury Committee to consent to the appointment or dismissal of the Governor of the Bank of England, goes to the heart of a very important constitutional question about the precise nature of the responsibility of, respectively, the Executive and the legislature in relation to public appointments. As we suffer the after-effects of a profound financial crisis, none of us needs to be reminded that this is a matter of interest not just to constitutional experts. The quality of regulation and supervision can have dramatic effects on rates of economic growth and on the wealth of nations.
Furthermore, as the hon. Member for Hayes and Harlington said, at a time of great change in the regulatory framework, which deliberately places the Bank of England at the very heart of our financial system, it is entirely right to double-check that we do, indeed, have in place appropriate scrutiny mechanisms for the Governor. The Financial Services Bill, which is now in the other place, gives the Bank considerable new powers in macro-prudential and micro-prudential regulation, and in the assessment and management of financial crises. Its governance should, indeed, be appropriate to these new powers, as the Treasury Committee has argued in its review of the Bank’s accountability to Parliament.
While I agree with the hon. Gentleman that the Bank must be accountable for its actions, I am reluctant to go as far as him, in calling for the radical step of providing the Treasury Committee with co-decision rights, in the form of a veto over appointment and dismissal. I will try not to linger over arguments that have already been very well made by many colleagues on the Government Benches, but let me reiterate that there has been an increase in accountability since the Bank acquired operational control over the setting of interest rates in 1997. While Bagehot’s dictum,
“We must not let daylight in upon magic”,
applied initially to the monarchy, it could have been said to have applied just as well to the Bank of England prior to 1997, but that is clearly not the case today.
Since 1997, the Treasury Committee has held regular pre-commencement hearings with the Governor, deputy governor and Monetary Policy Committee members, providing Parliament with a valuable opportunity to challenge key appointees before they begin work. Since 2009, these appointments have also been subject to open public competition. That was precisely what happened in 2009, when Paul Tucker became deputy governor, and this Government, like the previous Government, have agreed that that eminently sensible practice will continue.
The process of increasing accountability has carried on under this Government. Provisions in the Financial Services Bill for a non-renewable eight-year term, rather than the current system of a renewable five-year term, combined with internal reform of the Banks’ board arrangements, will further reinforce the Governor’s independence from the Government and the quality of oversight undertaken by the court of the Bank of England. The accountability deficit, which definitely existed, has therefore narrowed considerably over the past 15 years, and it will close still further if the Bill is enacted. Providing for a parliamentary veto over the appointment and dismissal of the Governor is not an ideal solution for closing what might remain of any accountability shortfall. I do not want to repeat what has already been said, in particular by my hon. Friends the Members for Wimbledon (Stephen Hammond) and for Great Yarmouth (Brandon Lewis) in their excellent speeches, but I worry that giving the Treasury Committee strong powers—in effect, powers of co-decision—in the appointment of the Governor might negatively impact on the Committee’s ability to scrutinise the Bank and hold the Governor to account for his performance. Put simply, Committee members will be unwilling to criticise the work of the Governor if they were complicit in his appointment in the first place. Having invested their own reputational capital in the appointment of the Governor, they will inevitably to some extent pull their punches in questioning him later. That is just human nature, and that is why we have a separation of powers in the Committee system.
The hon. Gentleman is obviously experienced in these matters, but what about the parallel case of local government-appointed chief executives? Also, the fact that there is a joint appointment of the Metropolitan Police Commissioner by the London assembly, the Mayor and the Home Secretary does not fetter their ability to ask tough and robust questions, as they are required to do—and as we are required to do. I do not see why somebody who was involved in deciding who to appoint to a post will later not properly question what that appointee does. We are here because people have sent us here to ask tough questions.
I thank the hon. Gentleman for his excellent intervention, but I would make an important distinction between being consulted and having the right of decision. That is a fundamental distinction and, on balance, arrangements that tilt towards giving the Select Committee system powers of decision over public appointments are going too far. The role of Select Committees might be better restricted to consultation than decision.
Does my hon. Friend agree that there is another distinction, particularly for the example of local authorities? I was a local authority leader when we appointed a chief executive, and there are two implications. First, although the chief executive is approved by the council, they are always clearly the choice of the leader and, more to the point, they are the chief executive of the body appointing them. They do not become the governor of a body that is, in theory, completely independent, as would be the case with the Select Committee.
I thank my hon. Friend for that point. I remind the House of what I was permitted to relay about the private views of the Chairman of the Treasury Committee. His private view—he was not speaking in his capacity as Chairman of the Committee—
Order. With respect, shall we leave the Chair of the Treasury Committee to express his own views and stop talking about his private views?
Thank you, Madam Deputy Speaker. I will follow that guidance.
I am equally concerned that giving the Treasury Committee a veto over the dismissal of a Governor could, in certain circumstances, create an unacceptable situation in which the Governor has lost the confidence of the Government but hangs on as a lame duck. That would clearly be unacceptable given the Executive powers he would be discharging on behalf of the state. That is exactly why the Government have historically attempted to address those issues by limiting the Treasury Committee’s role to non-statutory pre-commencement hearings with members of the Bank’s policy committees, which of course already include the Governor and deputy governors.
Let us not forget that the Treasury Committee already has a huge impact through its oversight, as Lord Burns noted in another place,
“simply by the way it brings people in, talks to them, summarises its opinions and then leaves it in the hands of Ministers to decide how far they wish to take account of those views”.—[Official Report, House of Lords, 26 June 2012; Vol. 738, c. 163.]
Does my hon. Friend think that the Bill would give the Select Committee enormous powers that are totally incommensurate with its constitutional functions in this House?
Yes, I could not agree more with my hon. Friend. Like other Members who I will not mention again, I think that it would be far preferable for the Treasury Committee, if it is to have a formal role in any appointment of the Governor of the Bank of England, to be a statutory consultee. I do not believe that it would be remotely appropriate, however, for it to be given powers of decision over any such appointments.
In my view, moving towards the system of making the Select Committee a consultee, perhaps through a tweak to the Financial Services Bill as it goes through the other place, would be a more sensible system that would not cloud lines of accountability and would, in my view, avoid putting the Treasury Committee in the position in effect of having to mark its own homework. That would inevitably be the case if it were given veto rights over a candidate that it had itself jointly chosen in a binding pre-appointment hearing. From Parliament’s perspective, I believe that it would be better and preferable to stick with the status quo, whereby the appointment of the Governor is a matter for the Crown on the advice of the Chancellor and the Prime Minister. That enables the Treasury Committee to do its job of holding the Bank to account regularly and effectively in hearings with policy committee members.
In support of calls for a parliamentary veto of the appointment of the next Governor of the Bank of England, much has been made of the supposed precedents set by the Treasury Committee’s veto in the appointment of the head of the Office for Budget Responsibility. Reference has also been made to the rather more long-standing role of the Chairman of the Public Accounts Committee in the appointment of the Comptroller and Auditor General. The CAG is an officer of Parliament but until 1983 was appointed by the Executive. Since the passage of the National Audit Act 1983, the CAG has been appointed following a vote in the Commons on a motion proposed by the Prime Minister with the agreement of the Chair of the PAC. The selection process preceding that is run by an unusual partnership between Parliament and the Government, with the Chair of the PAC sitting on the selection panel with representatives of the Executive.
I happen to think that the comparisons are rather misleading and unhelpful. The role and responsibilities of the Governor in economic and financial policy making are completely different from the role of the Chair and members of the OBR, who are responsible collectively for producing forecasts and other analyses twice a year. In the case of the OBR, a parliamentary veto of the appointment can make sense in terms of providing assurance about the independence of the role of the OBR. The role and responsibility of the Governor are completely different. Whereas the OBR performs an important function in providing an independent and unbiased forecast on which Government policy can be based, the Governor carries out Executive functions on behalf of the state and has responsibilities delegated to him for key areas of economic policy.
A further important difference already touched on by my hon. Friend the Member for Great Yarmouth is that the appointment of a prospective Governor is clearly market-sensitive in a way that appointments to the OBR or National Audit Office in the case of the Comptroller and Auditor General clearly are not. Once an appointment is announced, his or her perceived policy leanings—whether or not, for example, the next Governor is perceived to be a hawk or a dove—can be duly factored into asset prices in an orderly way. Pre-appointment hearings of a sort that give MPs on the Treasury Committee a potential veto could quite easily cause anxiety and costly volatility in financial markets, for little obvious benefit—a point also made by my hon. Friend the Member for Spelthorne (Kwasi Kwarteng).
To reiterate the central point, rather than giving the Treasury Committee a veto, a better option would be to upgrade and modernise consultation arrangements, potentially to include not just the Chair of the Treasury Committee—a point that I made earlier—but the chairman of the court of the Bank of England. It is important that we upgrade and modernise the court of the Bank of England so that it can perform its oversight function more effectively than it traditionally has done and so that it feels properly empowered to use the rights that it already has under the Bank of England Act 1998, which are to manage the Bank’s affairs, other than the formulation of monetary policy. That means much more than simply addressing what many have described as an excessively deferential culture at the “court of King Mervyn”, as the Financial Times cheekily described it some time ago. It means more than changing the court’s somewhat archaic name, or removing a little of the flummery—the men in pink coats deferentially bearing silver platters around the Bank, and so on.
It would be a tragedy to change some of the historic appurtenances of the Bank of England that remind us of the great rich tapestry of our history.
My hon. Friend is right. It is important to focus on the substance of what needs to change at the court, rather than on the men in pink coats and the silver platters. That means ensuring that members of the court, or the supervisory board, as the Treasury Committee would prefer it to be called, have the ability and willingness to take a tough and challenging line, with a chairman who is prepared to take on a rather more effective and higher profile role than has, perhaps, been the case in the past.
Logically, if anyone should be given a right to consent to the appointment or removal of the Governor of the Bank of England, it should be the chairman of the court of the Bank of England, rather than the Treasury Committee as a whole. That avoids many of the constitutional difficulties to which many of my hon. Friends have referred.
I thank the Minister for that intervention. The Governor can be removed only with the assent of the court of the Bank of England, but the chairman of the court is not at present a statutory consultee in the appointment of the Governor. One of the means of strengthening the court as an oversight mechanism might be to consider whether the court, through the chairman of the court, could be made a statutory consultee in any appointment process. If the chairman and the court are to be taken seriously by the Governor, and given that it would be unacceptable if a Governor were appointed in whom the chairman of the court did not have confidence, it is essential that he should be seen to be somebody who has played a significant role in the appointment of the Governor. I am therefore sympathetic to the idea—originally floated, I acknowledge, by Baroness Wheatcroft in the other place—that the chairman of the court of the Bank of England should be consulted by the Chancellor, and I hope that the Government might consider tweaking the Financial Services Bill to that effect on Report in the other House.
The legislation as it stands does not prohibit the Chancellor from consulting widely before recommending that a candidate be appointed as Governor, and in practice the Bank of England and the Treasury work closely together to recruit key Bank of England posts. The Financial Services Bill would strengthen the governance of the Bank of England if it specifically mentioned the chairman of the court as a statutory consultee, and thereby indirectly achieved the principal objective of the Bill before us without introducing all of the constitutional risks that come with giving the Treasury Committee a veto.
As I said earlier, there is an important distinction between binding pre-appointment hearings and advisory confirmation or pre-commencement hearings. We more or less have the balance right today between those two forms of parliamentary scrutiny, and I strongly urge the House not to veer wildly to an extreme that it may later come to regret.
I have made clear my concern that the Treasury Committee’s ability to scrutinise the Bank of England effectively would be impaired if we were to make it complicit in the appointment of the Governor. I have also argued that the supposed precedents set by the role of Parliament in the appointment of the head of the OBR and the Comptroller and Auditor General are misleading. With an enhanced role for the chairman of the court of the Bank of England, potentially with a consultee role for the Treasury Committee; with an enhanced and streamlined court of the Bank of England, whose members are empowered to create a real atmosphere of challenge; with the introduction of a single eight-year term for the Governor rather than renewable five-year terms; and with regular scrutiny of the Governor, his deputies and policy committee members by an impartial Treasury Committee, we are putting in place a stable and strong governance structure for the 21st-century Bank of England that will equip it to play a central role in this country’s economic and financial system.
(12 years, 5 months ago)
Commons ChamberI can confirm to the hon. Gentleman that the Committee will not be restricted in any way. It will call whomever it wants. I suggested—but this, of course, will be a matter for the House—that it should call people to give evidence under oath. [Interruption.] As we are getting a question from an Opposition Front Bencher, let me say that the Committee will also be able to call former Government Ministers.
The shadow Chancellor seemed to suggest that the Chancellor was passing the buck to the Bank of England, and that the Bank was somehow conniving in LIBOR lying. Will the Chancellor confirm that the Financial Services Authority, in its investigation, found no evidence to suggest that the Bank of England at any point encouraged banks to low-ball their LIBOR rate?
The FSA’s report is very clear about the interaction between the Bank of England and Barclays. Paragraph 176 says:
“No instruction for Barclays to lower its LIBOR submissions was given”
during the telephone conversation that caused the press interest.
(12 years, 7 months ago)
Commons ChamberWe want all those sectors that have a competitive edge to have a comparative advantage for this country, providing jobs and opportunities when more than 2.6 million people are out of work. We want to see those sectors thrive.
Given the recent omnishambles, one would have thought that Ministers might stop and think before attacking those to whom they look to grow our economy. Far from it, however, as so far we have mentioned only the Foreign Secretary. The Secretary of State for Communities and Local Government also waded in to the row, in typical diplomatic fashion, saying that he agreed with what the Foreign Secretary had said, while the Defence Secretary—it is a shame that he did not stay in his place after his statement—then accused businesses of being whingers. The problem is that Ministers seem to inhabit a different planet from the rest of us. It is not that our businesses are not working hard enough; it is that there is a lack of demand and weak confidence flowing from the Government’s mismanagement of the economy, which has helped to tip us into a double-dip recession.
Does the hon. Gentleman recognise that UK gilt yields are at an historic low, and that we would be taking a tremendous risk with them if we moved away from an economic policy that no less a person than the Governor of the Bank of England has described as the “textbook response” to the situation this country faces?
That quote has already been used. I would say two things to that. The hon. Gentleman, who studies these matters keenly as a writer for The Financial Times, will know that Christine Lagarde, the head of the International Monetary Fund, has said that to have a credible fiscal policy, we need growth. The problem is that there has been no growth since the comprehensive spending review. Secondly, we have had historically low interest rates on our sovereign debt and, of course, we control our own monetary policy, which has helped matters.