The Economy

Lord McCrea of Magherafelt and Cookstown Excerpts

Tuesday 11th December 2012 Commons Chamber

[Ms Ritchie]

I thank the hon. Gentleman for his intervention. Like him, I believe that fuel laundering and smuggling is a major problem. It needs to be addressed by the Treasury, and by the Department of Finance and the Revenue Commissioners in the south of Ireland.

We have record youth unemployment in Northern Ireland, and local businesses face a climate of extremely low consumer confidence and no prospect of growth. We had the highest rate of youth unemployment in the last quarter for which figures are available—some 18%. More recently, we heard the terrible news of the closure of Patton, a major construction firm, with the loss of more than 150 jobs.

The Government have spoken repeatedly of rebalancing the economy, but talk of their flagship policy—the devolution of corporation tax—was notable only by its absence from the Chancellor’s statement last week. It is critical that the Northern Ireland Assembly and Executive are granted more economic levers that we can use to rebuild our economy. The Government’s decision has been a long time coming, but it is crucial for our medium and long-term planning that they make it as soon as possible.

The Chancellor listened to our concerns about the adverse impact of the carbon floor price and the exemption will deliver a degree of much-needed support to local business. However, such news does not remove the reality of the broader economic picture. As the Northern Ireland Finance Minister has indicated, the result will likely be more cuts being implemented by the Northern Ireland Executive, particularly with regard to welfare payments.

[Dr William McCrea (South Antrim) (DUP)]

I commend the hon. Lady for her speech. Does she agree that banks need to be more sympathetic in lending to small and medium-sized businesses if they are to prosper, because of the challenges they face?

[Ms Ritchie]

I thank the hon. Gentleman for his intervention. I agree that the banking regime in Northern Ireland is stringent at the moment. We have a unique situation in Northern Ireland. Some of the banking institutions are owned by the south of Ireland, but some have direct links to the Royal Bank of Scotland and Danske Bank. So there is that sort of mix as well. Suffice it to say that small and medium-sized enterprises are facing difficult economic challenges, and to have banks unwilling to lend or provide the necessary credit at this difficult time is not helping economic growth. That needs to be explored by the Treasury and, in the case of Northern Ireland, in some instances, directly with the Department of Finance in Dublin.

Oral Answers to Questions

Lord McCrea of Magherafelt and Cookstown Excerpts

Tuesday 11th September 2012 Commons Chamber

[Mr Osborne]

I think it sends a terrible message to my hon. Friend’s constituents in Brighton and across the country. The last thing this country needs at the moment is a series of strikes. We have struck a good deal for the public sector on public sector pensions that will ensure that people continue to enjoy some of the best pensions in Britain, while at the same time reducing the cost to the taxpayer by 50% over the long term. We are also instituting public sector pay restraint so we do not have to make even more difficult decisions about job losses. That is because we are dealing with a very difficult economic situation with a very large deficit. I would hope that the trade unions would understand that rather than try to take their members out on strike.

[Dr William McCrea (South Antrim) (DUP)]

Will the Chancellor tell us how money can be taken out of the banks and put into small and medium-sized businesses right across the United Kingdom? Without it, we are certainly not going to kick-start the economy.

Public Sector Pensions

Lord McCrea of Magherafelt and Cookstown Excerpts

Tuesday 19th June 2012 Westminster Hall

[Richard Fuller]

The hon. Gentleman makes an extremely fair point. I was not in Parliament in the 1970s, and I am not sure whether such points were made at that time, but clearly countries that have received the beneficence of resources—Norway is one example, and Australia another—have seen the value of looking at the long-term investment of natural resources, and have set up future funds to provide for future pension liabilities. The hon. Gentleman makes an excellent point in support of my argument. Of course, we are not as endowed with natural resources as those countries are, but the fundamental point about fairness between the generations is still solid.

Let us remind ourselves that the current level of public sector debt—the debt that we all talk about and are so worried about—is £1 trillion. The public sector pensions liability, which we do not often talk about, is £1.1 trillion. All those obligations have to be paid by future generations and, as we have so significantly ramped up this first amount of debt, should we not look for ways to reduce the unfunded part of public sector pensions for future taxpayers? A future fund would, over time, eliminate that burden from taxpayers and transfer it to the returns that would be generated from a funded pension scheme.

The Intergenerational Foundation has noted some questions about public sector pensions, and also some of the risks, and this change would reduce risk. At the moment, Lord Hutton’s proposals manage risk by way of a view of a cost ceiling on total public sector pension liabilities, which is based on projections of economic growth. The projections show the liability as a steady share of gross domestic product, falling in the long term. I am not sure that history is littered with Governments who under-predict economic growth; in fact, I think that it is often the other way around, with Governments having a rather rosy view of future growth. So, inherently, as we consider the risk that will fall on future generations, there is a likelihood that the Government, under current systems, will underestimate the liability that they are passing on. As Lord Hutton said:

“What we’ve seen is how very quickly the assumptions which underpinned my assessments of the long-term sustainability of public services pensions have been shown to be too optimistic…That is going to affect the sustainability of public sector pensions in a negative way.”

The change in the pensions structure would considerably eliminate that risk.

I shall now talk a bit about the second point, which is the rebalancing of the structure of earnings, to restore the emphasis on pensions. Over the past few decades, the role that pensions have played in the round of the compensation offer made to potential employees has reduced considerably and, I would say, undesirably. There is much more emphasis today on the immediate levels of compensation, on “How much will I earn this year?” rather than on “How much of what I earn am I putting away for my long-term retirement needs?”.

House of Commons statistics have tracked the active membership of occupational pension schemes for private sector and public sector employees, and have compared 1995 with 2010. Over that period, the number of public sector workers in such pension schemes increased, from 4.1 million to 5.3 million, but the number of private sector workers halved, from 6.2 million to 3.1 million. That was a halving in the coverage of occupational pension schemes in a very short period—15 years—which is why I say that the change has been dramatic. Being conservative, I like to see things in the round of their consequences. We are now seeing that many people fear that they do not have enough money for their retirement, and the Government have rightly recognised the need to encourage pensions through auto-enrolment programmes. This would be another measure that would encourage people by, as I shall explain in a minute, creating a floor on public sector pensions that would enable the focus to turn back to how pensions will be provided for private sector workers.

The third point is the role of a future fund in creating a sovereign wealth fund. To create a future fund, we have to fund it—and, boy, does it take a lot of money. If we have £1 trillion of liabilities, that is a lot of money to save up, so a long period is needed. The Australian future fund set a period of 14 years before money could be taken out: the law was passed in 2006, and no disbursements can be made until 2020. For the UK, taking a 20-year period, it would require a minimum of at least £20 billion a year—probably significantly higher than that; somewhere between £20 billion and £30 billion a year—fully to fund all the Government pension schemes over those 20 years.

To put that in context, that figure is equivalent to 3% of total Government expenditure. It sounds a lot, but the Government spend a lot—it would be 3% of expenditure—and it would be only half the money that the Government are spending on the interest on their own debt. It is therefore a manageable amount of money, even though the amount is significant. In addition to looking to fund that out of annual public expenditure, it would also be possible to make asset sales into the fund. In fact, the Australian future fund started with an asset transfer, from the sale of part of the telecommunications company Telstra, for its seed investment. I have checked—with the Minister here, I wanted to be absolutely sure—and the Government’s deficit reduction targets would not be imperilled by any future sale of assets going into a future fund. Quite rightly, if I may say so, the deficit reduction targets are set absent of any funds from the proceeds of the disposal of certain assets, such as those of Royal Bank of Scotland.

Some may say that taking £20 billion out of public expenditure when we are trying to create demand is a very odd suggestion, but of course the £20 billion would not be lost from the economy. Essentially, £20 billion would be transferred from current expenditure to an investment fund for long-term investment. That money would become a fund of resources that could be used to invest in long-term projects. If we take the Ontario teachers’ pension fund—I hope you will look it up later, Mr Leigh—it involves patient capital that is invested in long-term investment projects. It is there to secure the pensions of those wonderful teachers in Ontario; they are not quite, but almost, as good as the teachers in Bedford. It is there to protect their pensions, which it does by looking for long-term investment returns. It is the fund that seeded the money for Birmingham airport. If we had our own infrastructure fund set up as a future fund for public sector pensions, we could provide resources to fund long-term investment projects.

Let me say something that I rarely say, which is that I agree with the comments made by the Secretary of State for Business, Innovation and Skills, who spoke yesterday about the need for a significant investment in housing construction. Of course, we need other construction projects, but we understand that we are under fiscal restraints because we must demonstrate that our deficit is being reduced. I ask the Treasury team to consider this very carefully: in current market conditions, particularly with the constraints of fiscal responsibility and the lenient conditions for monetary policy, a future fund would be uniquely placed to provide the long-term patient capital to fund such infrastructure investments, without there being any challenge to the probity of the Chancellor’s deficit and debt reduction policies. This environment provides an opportunity to fund and seed a future fund with the resources from the Government’s credit easing or quantitative easing programmes, and that would happen in such a way that markets would see that it was matching a reduction in the country’s long-term public liabilities for funding public sector pensions.

[Dr William McCrea (South Antrim) (DUP)]

The hon. Gentleman is making a visionary proposal. How does he believe that he could bring the public with him, not only in accepting his proposals but in having a profitable engagement about them?

[Richard Fuller]

I am grateful to the hon. Gentleman for his intervention. I recently got the box set of “Yes Minister”, and “a visionary proposal” has echoes of “a courageous decision” in the lexicon of that show. However, he raises the important point of how we are to bring the public along with us. That can be done in a number of ways. First, it is a responsibility of our generation to show young people that we are doing everything we can to give them a better future. That is what mums and dads are doing around the country right now—cutting back on their own budgets to make sure that their kids have a few extra luxuries and are protected from some of the problems that we are going through as we try to reduce our deficit. The future fund would be another way of engaging with and doing something for younger generations, and I hope that groups such as the Intergenerational Foundation will press that message.

I am conscious that I am taking up the Minister’s time, but I want to make these points, if I may, Mr Leigh. Secondly, trade unions have been very concerned about a race to the bottom on pensions and—you know what—for many reasons, they have been fair in making that point. We do not want to have minimal or zero pension provision. It would be too attractive to take that headline number for this year’s income; it would be far better for us to have a structure in which people understand the proper role played by pensions. If we said to trade unions, during the process of reviewing public sector pensions, “That’s it—no more reviews,” that would deal with all the fears of people enlisting in pension programmes about another change somehow coming in. They have already had one change and now there is another, so they are thinking, “Well, there’ll be another one, so why should I contribute to a scheme when I don’t know where it’s going?” If we called a halt to that while investing in a public fund—the future fund—we could tell trade unions, “That’s the floor in public sector pensions. Now work with the Government on trying to encourage the private sector to start rebalancing the ways in which it looks at compensation, so that the role of pensions is restored to its rightful place.” In those ways, we can bring people along.

Of course, the person I most wish to bring along with me in relation to this opportunity is the Minister, but I am fearful that I am not in a position to do so today. However, I hope that, much like the hon. Member for South Antrim (Dr McCrea) and me, she is at least engaged to look at what the hon. Gentleman called the “visionary” idea of having a proper and fair way between the generations and of accounting for public sector pensions through a future fund.

Oral Answers to Questions

Lord McCrea of Magherafelt and Cookstown Excerpts

Tuesday 24th April 2012 Commons Chamber

[Mr Osborne]

I can certainly give my hon. Friend that assurance and say to businesses in her constituency and others that the national loan guarantee scheme is now available through most of the high street banks. We are also investing through something called the business finance partnership in non-bank financing of businesses. Some of that money will be for very small businesses, too, through peer-to-peer lending. As everyone accepts, I think, financial markets across the world, particularly in Europe, are stressed. That is why the Government have to step in and help, and that is what the £20 billion of guarantees that we are offering under the scheme will do.

[Dr William McCrea (South Antrim) (DUP)]

The Chancellor of the Exchequer must be aware of the pressures being exerted by banks on small and medium-sized businesses. What more can he and his Government do to get the banks to assist by making credit available rather than undermining many of those very good businesses?

[Mr Osborne]

The hon. Gentleman is right that small businesses face difficult financing conditions because of the stress in the financial markets and the fact that banks are not able to access funding in the way that they were four or five years ago. That is why we have taken the step of credit easing, which is not something that a Government would do in more normal economic times, and it is why we have the finance partnership and are expanding the enterprise finance guarantee. Those are all designed as Government interventions, using the good credit worthiness that we have earned for this country, to ensure that those lower interest rates can be passed on to small businesses.

Royal Bank of Scotland (FSA Report)

Lord McCrea of Magherafelt and Cookstown Excerpts

Monday 12th December 2011 Commons Chamber

[Mr Hoban]

My hon. Friend makes an important point and he speaks with some experience, having worked with the FSA. We need to look carefully at the fit and proper person test for people becoming registered with the FSA to ensure that they are good quality, and can do the job properly and competently.

[Dr William McCrea (South Antrim) (DUP)]

I welcome the Minister’s statement. It is right and proper that we review past failures and learn from them, but how can we use the current situation to get the banks to lend to the hard-pressed small and medium-sized businesses crying out for finance they urgently need, especially in Northern Ireland, where credit is particularly squeezed?

[Mr Hoban]

The hon. Gentleman makes an important point about the credit situation in Northern Ireland, and I know that the hon. Member for East Antrim (Sammy Wilson) pays close attention to it. We need to ensure that banks are sufficiently well capitalised to enable them to lend to businesses. One of the things that the hon. Gentleman may have noticed from last week’s report from the European Banking Authority is that no UK banks required additional capital, because they are already well capitalised and should be in a position to lend, as was demonstrated by the third quarter Project Merlin figures.

Eurozone

Lord McCrea of Magherafelt and Cookstown Excerpts

Monday 10th October 2011 Commons Chamber

[Mr Osborne]

There are quite a lot of fire analogies there. We are trying to do those things. First, we are trying to protect our own country. Of course, this was an independent decision of the Bank of England, but when it made its decision it explicitly referenced what was happening in the eurozone as the principal reason for doing so. Secondly, we are very actively engaged with the eurozone in trying to find this international solution to its problems. I mentioned all the conversations that have been had just in the past 72 hours or so. There have been a string of international meetings where we have made forceful interventions. We have helped to push the eurozone in the right direction, but there are also people—leaders—in the eurozone who are trying to lead it in the right direction as well. The hon. Gentleman’s point about the rather remarkable vote by Labour Members against the IMF is well made.

[Dr William McCrea (South Antrim) (DUP)]

In these challenging times for UK families, can the Chancellor assure the House that hard-pressed taxpayers throughout the United Kingdom will not be saddled with the financial burden of saving the euro? Will he continue actively to engage with banks to save the financial viability of small and medium-sized enterprises across the UK?

[Mr Osborne]

The hon. Gentleman makes a good point about the financial burden. Obviously we bear a burden as an economy that is closely inter-connected with the eurozone, but we took a decision that we wanted to get Britain out of the EU27 mechanism, and we put considerable negotiating effort into doing that. That meant not just the current mechanism, with its €60 billion capacity which had been established—we are still part of that—but ensuring that the permanent bail-out mechanism did not include people who were not in the euro. If the members of the euro want monetary union and want to move towards greater fiscal union, it is not reasonable to ask countries that are not in the euro to be part of one of the key mechanisms of that union, which is a bail-out fund.

Finance Bill

Lord McCrea of Magherafelt and Cookstown Excerpts

Tuesday 28th June 2011 Commons Chamber

[Jim Shannon]

The think-tank is ResPublica.

As the hon. Member for Gainsborough (Mr Leigh) said earlier, the tax burden on single people with no dependants on the same wage has been falling and far from being 50% above the OECD average, it is now actually below it. That is reflected in the fact that the tax burden on a one-earner married couple on an average wage with two children is projected to rise from 73% to 80% of that of a single person on the same wage by 2012-13, while the equivalent average burden among OECD nations is 52%.

In this context, it is strange that the Government have started investing what will probably end up being almost £12 billion on increasing individual allowances to £10,000. There is a cost factor there and an agreement within the coalition on how that is going to happen. That will cost us all. It is a measure that will have a disproportionately positive effect on single people, yet the Government will not have brought forward a much cheaper transferable allowance policy.

I do not believe that the current situation is sustainable. It is now urgent that the Government introduce legislation to give effect to the transferable allowance. I hope that the Minister will be able to provide robust assurances on this point and a commitment to ensure that as the tax burden increases in the context of the current financial difficulties, it is allocated in a way that is fair, sensitive to family responsibilities and recognises the real strengths that marriage brings to society. I also trust that the Minister will address the important points raised by other hon. Members, including the need urgently to address the IT implications of recognising marriage in the tax system. There are changes to be made, there are costs and a system will need to be set up.

I urge Members to support new clause 5. I believe it is worthy of support. I understand that there are differences of opinion. This is probably the first time that I have disagreed with many colleagues on the Opposition Benches, but I believe in my heart that this is an issue of some importance.

[Dr William McCrea (South Antrim) (DUP)]

Does hon. Friend accept that no one here needs to apologise for believing that this nation was richly blessed whenever it honoured marriage in legislation?

--- Later in debate ---

[Kate Green]

The hon. Gentleman is absolutely right, because the majority of people, including young people, want to be married. Most people who become lone parents never set out to do so; they did not enter into relationships expecting or wanting those relationships to break down. However, people often find themselves, at least for a time, bringing up children on their own. My point is that the well-being of children when that relationship breaks down must be a priority for this House. He probably feels as strongly as I do about that, and I hope that hon. Members will focus their attention on it when considering the new clause.

I want to say two things about the evidence that has been mentioned and debated by hon. Members this evening, the first of which relates to the cause and effect evidence. I perhaps raised this clumsily in earlier interventions, when I sought to point out that, to some degree at least, married couples are a bit of a self-selecting category. There is a preponderance of marriage among those who already had more financial and social resources before they married. Our policy should adjust to that where children who come from different social backgrounds may be disadvantaged, rather than seek to reinforce some of the societal disadvantages which mean that there is a prevalence of marriage among higher socio-economic groups.

[Dr McCrea]

As a minister, I have been marrying couples for the past 42 years and I do not know where the hon. Lady is getting her statistics from, as they certainly do not reflect the reality in the Province. She gives the idea that people who enter into marriage are at the upper end of the financial stability scale, but the vast majority of people who have been married have been at the lower end of the scale or in between. The reality is certainly not what she is describing to the House tonight.

[Kate Green]

I cannot question the hon. Gentleman’s evidence about Northern Ireland, but I can say that the position across the United Kingdom as a whole is that a higher rate of marriage correlates with people in higher socio-economic groups. We were helpfully reminded by the hon. Member for North Cornwall (Dan Rogerson) of an important question, which relates to the second point about the evidence: even if we could do something to spread the advantages of marriage across wider society, would a tax break do this? I have seen and heard no evidence, either this evening or during the many years that I have studied this subject, to show that a tax break persuades people to get married or to stay married. In that sense, particularly in these constrained fiscal circumstances, it seems extraordinary to spend public money on a mechanism that has no evidence to prove that it works effectively. There are real issues to address in respect of what the evidence shows us. Saying that does not devalue, in any way, the importance of marriage; I merely say that when we spend money, we need to know what outcome we expect it to achieve.

Finance (No. 3) Bill

Lord McCrea of Magherafelt and Cookstown Excerpts

Wednesday 4th May 2011 Commons Chamber

[Kate Green]

We are worried about whether the quality of child care will be maintained as less funding becomes available in the child care market. Achieving quality is partly about ensuring that children from mixed backgrounds—

[The Temporary Chair (Dr William McCrea)]

Order. The hon. Lady is aware that Mr Evans has drawn her attention to the narrow nature of the clause. I am sure that she would like to get back to the clause as soon as possible.

[Kate Green]

Of course, Dr McCrea. I was simply going to make the point that quality is partly about diversity and about children from a range of backgrounds and settings being able to meet, play and learn together. One of the consequences of clause 35 is that we will see less of that.

There are a lot of stresses and pressures on the financial support for the child care market, and they will also be felt in families as parents struggle to pay what is typically a very substantial proportion of their regular monthly outgoings. Child care takes a big bite out of the family budget. I am sure all hon. Members are familiar with parents who say, “It’s almost not worth my while going back to work by the time I’ve paid my child care costs,” but those parents want to go back to work, because they recognise that that is in their long-term interest and that of their children. It is also important to our national economy that parents continue in the workplace.

Finance (No. 3) Bill

Lord McCrea of Magherafelt and Cookstown Excerpts

Tuesday 3rd May 2011 Commons Chamber

[Mr Ward]

It is useful to have on record your opposition to the reduction in corporation tax, which will enable the companies concerned to employ many of the people about whom you have been talking. However, what really interests me is why, when the Government are monitoring every single day the repayment of loans to the banks, the effect of the tax levy and its adequacy, banks’ lending to businesses—which was mentioned by the hon. Member for Denton and Reddish (Andrew Gwynne), who is sitting next to you—and the strengthening of the banks’ balance sheets, you are prepared to wait—

[The Temporary Chairman (Dr William McCrea)]

Order. Let me draw the hon. Gentleman’s attention to the fact that “you” refers to the Chair, and that I am not participating in the debate.

[Mr Ward]

I apologise, Dr McCrea. I should like to know why the hon. Member for North Durham (Mr Jones) is prepared to wait seven or eight months for a review of something that the Government are doing every single day.

Amendment of the Law

Lord McCrea of Magherafelt and Cookstown Excerpts

Wednesday 23rd March 2011 Commons Chamber

[Sammy Wilson]

I hope I am not quoting the Chancellor wrongly, but I think he talked about nine years in the future before those changes have an impact, so again we have to ask, “What is the impact going to be?”

[Dr William McCrea (South Antrim) (DUP)]

Does my hon. Friend agree that the Chancellor missed a vital opportunity for the Northern Ireland economy today? Does my hon. Friend think it right that a £7.5 billion loan from the British Exchequer to the Government of the Irish Republic should be used to enable that Government to abolish air passenger duty, which in turn gives them an unprecedented competitive edge on flights, bearing in mind that it impacts on my constituency and the international airport in it?

[Sammy Wilson]

I am a bit miffed, because I wanted to use that point later in my speech, so I will have to scribble it out. When we look at some of the issues, whether they are the delays, the amount of money being put in, the offsetting of increases in taxation when some tax cuts have been made, the regulations or the consultation that has still to take place with Europe to see whether we can reduce red tape, we have to ask whether the predictions for future growth based on the supply-side measures in the Budget are as fragile as the autumn predictions that were wiped out by a fall of snow. If that is how fragile the predictions are, then I have concerns.

There is another side to the coin, because not only do we have to increase the productive potential of the economy, but people must be willing to purchase the goods that can be produced, and aggregate demand can be made up of several different factors. The Government have already ruled out one for very good reasons, and I accept that the deficit has to be reduced. I may have some issues about how quickly it is being reduced, but the one thing we do know is that Government spending is not going to take up the slack that already exists in the economy.

Consumer spending is not going to take up the slack, either, because the Chancellor made it quite clear that he would not make any tax giveaways. Indeed, if one looks at what he said about the indexation of direct taxes, one finds that he has now built automatic increases into the tax system for the next four years. There will not be discretion on a year-to-year basis; inflationary increases are now built into the tax system.

That leaves investment demand and exports, and it seems that the Chancellor is emphasising the role of exports. Given that over the past year and a half the exchange rate has fallen by 20%, our export growth is still one of the weakest among the OECD countries. Investment might improve competitiveness, but the only direct measure that the Chancellor has produced today is the export credit guarantee. I have quickly looked through the Red Book to see how much the guarantee involves, and I cannot get a figure, but that is the only measure to increase the one component of aggregate demand on which the Chancellor is relying to improve growth in the economy.

If we look at the supply-side measures and the lack of demand-side measures, we have to ask, “Can we really be confident that this is a Budget for growth?” The conclusion that I come to—not because I want to take a pot-shot at the Government, but because I want to get in behind the figures to see whether the hope being held out is genuine—is that I am left with some concerns.