Amendment of the Law
Matt Hancock Excerpts(13 years, 3 months ago)
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Ed Balls (Morley and Outwood) (Lab/Co-op)
For a fleeting moment, I thought that I was in the wrong debate. It is always interesting to hear proposals put before the House by the hon. Member for Wellingborough (Mr Bone).
Twelve months ago, at the time of last year’s Budget, unemployment was falling, growth was rising, inflation was low and stable, and we were on track to halve the deficit in four years. Indeed, because more people were in work, paying taxes and not receiving benefits, borrowing ended up £12 billion lower last year than was forecast the autumn before. However, there was still a long way to go. Following the biggest global financial crisis of the past century, we were getting back on the right track to get the deficit down and to restore our economy to sustainable growth.
One year on, the economic context for this Budget is radically different. Inflation is up to 4.4%, increasing prices for everyone and threatening a rise in mortgage rates. Unemployment, which was falling, is now rising to its highest level for 17 years. Consumer confidence has seen its biggest fall for nearly 20 years. Our economy, which was growing, has ground to a halt according to the latest figures. Just a few months ago in the autumn, we were told by the Prime Minister, among others, that the economy was out of the danger zone. However, on growth, inflation and unemployment, it appears that we are now re-entering the danger zone.
The question that families and businesses up and down the country will be asking is what changed over the past 12 months. Let me set out for the House what did change over the past 12 months. Yes, commodity prices have gone up. Yes, world oil prices are higher. Yes, we had a bad winter. However, other countries such as America, Germany and France have been similarly affected by higher oil and commodity prices and by bad weather, and their economies are still growing, unlike the British economy. Germany had worse snow than Britain, there was a big freeze in France and the US had the worst blizzards for decades, but their economies grew in the fourth quarter of last year. While our growth forecasts have worsened, theirs have improved. The German economy is forecast to grow more strongly than it was last year, as is the American economy. Growth in the world economy has been revised up. Which is the major economy that is now downgrading its growth forecasts? It is the United Kingdom.
Matthew Hancock (West Suffolk) (Con)
Will the right hon. Gentleman accept and welcome the fact that the British economy is growing faster than the EU average, or will he continue to talk down the economy?
Ed Balls
On the latest figures, the British economy was not growing at all—in fact, it had contracted by 0.6%.
I see the hon. Gentleman’s press releases regularly. They come across my desk two or three times a day. I want to give him some support. [Interruption.] I want to give him some support. The hon. Gentleman has a campaign to reverse the cancellation of funding for a dilapidated school in his constituency following the cancellation of Building Schools for the Future. I am right behind him. He has called for a new pedestrian crossing and to unblock the money for it, which is being blocked by a Tory council. I am with him. He has campaigned to keep his local library open. I am right behind him on that one. He wants to keep Thetford forest safe. Yes, I am with him on that one. He asks how we can deal with the pressures on the voluntary sector. I have to say, I think that he is in the wrong party.
Under Labour’s plan, the economy was set to grow strongly. [Interruption.] I have just given the hon. Gentleman more publicity than he had in three months from all those press releases.
Ed Balls
I think the rise in VAT was a mistake, and I think the hon. Gentleman used to agree. I think that spending cuts this year are a mistake, and I think he used to agree with that too. I would halve the deficit over four years, and borrowing would have come in £20 billion lower—[Interruption.] I will answer the question. I set out more detailed spending cuts—in schools—than any other Cabinet Minister at that time. We said we would cut £1 billion from policing, and, for example, that we would go ahead with the disability living allowance gateway reforms. However, the scale and pace of the Government’s cuts are too deep and too fast, which is destabilising our economy. We were right to say, “Don’t make the cuts until the recovery is secure. If you make cuts on this scale before the recovery is secure, what do you end up with? No recovery at all.” That is the situation today.
Ed Balls
I also remember the Chancellor saying that the Budget was progressive, and it turned out to be regressive, but my hon. Friend is being unfair to Liberal Democrat colleagues. They were not against a VAT rise; they were against a Tory VAT rise. Nick Clegg’s general election leaflets said, “Stop the Tory VAT bombshell,” and he never said, “Stop the Tory-Liberal Democrat VAT bombshell,” so my hon. Friend is being a little harsh on colleagues.
Matthew Hancock
The right hon. Gentleman talks about international evidence, but why should we listen to him rather than to the OECD, the International Monetary Fund, the European Commission and all major business organisations, which support the concept of dealing with our debt?
Ed Balls
The hon. Gentleman needs to be careful with boastful interventions. Let me read out a quotation:
“The measures we have taken have been commended by international bodies such as the European Central Bank, the European Commission, the IMF and the OECD. They have also won the approval of the international markets.”
That is the financial statement of 9 December 2009 from the Irish Finance Minister. He is no longer in office, because he had OECD and IMF approval for a policy that drove unemployment up, growth down, confidence down and the deficit up. Does that not sound somewhat familiar? [Interruption.] If the hon. Gentleman wants to make a third intervention, I shall happily take it, but perhaps he should reflect a little further before he puts out his next press release.
The Chancellor said yesterday that this was not a tax-raising Budget and he did not need to ask for a penny more. However, when we study the details of the Red Book—in table 2.1 on personal tax, the tax cuts from the personal allowance and the tax increases from the switch to the consumer prices index, and changes to national insurance contributions—we find that the tax increases are bigger than the tax cuts. That is the fact. The increase in the personal allowance, which the Liberal Democrats boasted about with such enthusiasm yesterday, is completely crushed by the CPI increase: that is there in the Red Book. The Chancellor said that he would not come along and mislead the House in his Budget, but that is exactly what he did.
We also found out that because the Government changed the indexation of national insurance and the personal allowance, and because many people in our country—disproportionately women—are in part-time work and on low wages, and pay national insurance but not income tax, yesterday was a tax rise for 400,000 of the lowest-paid workers in our country, disproportionately women and part-time workers. That never made it into the Chancellor’s speech, nor did he say that the personal allowance changes were worth £48 a year, but the VAT rise will cost the average family with children £450; that never cropped up in the speech either. Nor did he point out that the upgrading of the GDP deflator—the inflation measure—means that despite the Prime Minister’s promises last year that NHS spending would rise in real terms year by year, it will actually fall year by year. That is another broken promise from the Prime Minister.
Many business people will be asking, “Why didn’t we have a Budget that did a bit more for growth?” It looks as if I was right in Treasury questions on Tuesday when I suggested to the Chancellor that his growth strategy was so flimsy he needed to beef it up, because he has now cut corporation tax by 1p, which is welcome, and is paying for it through measures on tax avoidance, which is also welcome. However, paragraph B.13 of the OBR’s Budget document reads:
“The OBR was notified of the change to corporation tax and the 1p cut in fuel duty…too late to incorporate any indirect effect of these measures in the economy forecast.”
I do not think he told the OBR until the afternoon before. However, it was able to give some clarity. It said that it believed that
“any such effects would have been minimal.”
This growth strategy has been produced with fanfare and much delay, but since publication his own independent auditor, the OBR, has said that it will have no impact on growth and jobs in our economy. Is that not the reality?
An alternative was open to the Chancellor, and it was one that I have set down. He could have decided to follow the American example and cut the deficit at a steadier pace in order to strengthen growth and lower unemployment.
European Summit
Matt Hancock Excerpts(13 years, 3 months ago)
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Matthew Hancock (West Suffolk) (Con)
Will the Minister confirm that the contingent liability under the scheme was set up after Labour had lost the election by the then Labour Chancellor? Does what is happening in Portugal, where interest rates have today risen above 8%, not provide the most eloquent lesson on what would happen here if we did not get a grip?
Mr Hoban
My hon. Friend is absolutely right. The decision taken by the previous Chancellor meant that we became part of the ESFM, and that is why the liability exists today. My hon. Friend is absolutely spot on: we have taken difficult decisions in this country. This Government have decided to tackle the deficit that Labour left behind, and we have a clear plan to do it. The Opposition have no ideas. Under a Labour Government, this country would be running out of steam.
Amendment of the Law
Matt Hancock Excerpts(13 years, 3 months ago)
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Richard Harrington (Watford) (Con)
I assure you, Mr Deputy Speaker, that I will stick to the guidelines you have given. In fact, uniquely both in this House and in life generally, I find that I am speechless after listening to the hon. Member for Kingston upon Hull North (Diana Johnson). There is a holiday attraction somewhere called la-la land. I cannot remember who mentioned it but, obviously, it is nothing to do with Kingston upon Hull North. The picture the hon. Lady painted forgets who has been in power for the last 13 years and who has been responsible for a bloated public sector and a starved private sector, as well as for unemployment and all the other problems that many people, including the Chancellor, have spoken about today.
Matthew Hancock (West Suffolk) (Con)
Is my hon. Friend as confused as I am given that the previous speaker started her speech by saying there are new jobs at Siemens in Hull, thereby showing that manufacturing is expanding under this new Government?
Richard Harrington
My hon. Friend makes a good point, but we heard about Siemens so long ago that it had slipped my mind.
I shall restrict my comments to my experiences in business of dealing with the economy, and the experiences of my constituents and their businesses in Watford. Watford is not dissimilar to Kingston upon Hull. It has significant unemployment and shares all the same problems as many other parts of the country. Notwithstanding the Chancellor’s commendable statement today, the most significant factor in encouraging businesses to invest is the general macro-economic situation. Therefore, the most important aspects of this Budget and the last Budget are the measures for reducing the deficit.
Budget Responsibility and National Audit Bill [Lords]
Matt Hancock Excerpts(13 years, 3 months ago)
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Kerry McCarthy (Bristol East) (Lab)
The Opposition support the Bill. It has been debated at length in the other place and in this House on Second Reading, in Committee and—perhaps at greater length than some of us anticipated—on Report today.
Not much has been said during the passage of the Bill about part 2, which relates to the National Audit Office. That is not least because it implements the measures that were introduced in the Constitutional Reform and Governance Act 2010. It is fair to say that there is widespread agreement on part 2.
As was clear in previous proceedings, there is similarly common agreement on the creation of the Office for Budget Responsibility and on placing it on a statutory footing. We did, however, table a number of amendments in Committee to challenge some of the details of how the OBR will function, as one would expect from the Opposition. In particular, we addressed the concern that has been expressed inside and outside this House that the OBR may not turn out to be sufficiently independent from the Government. For the public to have confidence in the OBR, it has to be seen to be independent. That is why we proposed measures that would have made it more accountable to the House and measures that would have increased the role of the Treasury Committee. We also wanted to ensure that the division between the Treasury and the OBR in terms of staffing and premises was enshrined in law. We are grateful for the assurances that the Economic Secretary gave in Committee on those points. We also welcome her promise that substantive details of the contact between OBR staff and the Minister’s special advisers and private office staff will be published.
We were also concerned about the potential overlap between the OBR’s responsibilities and the Bank of England’s economic forecasts. We therefore proposed that the Bill provide for a memorandum of understanding to ensure that there was clarity from the outset for all parties. I urge the Economic Secretary to ensure that the memorandum is subject to proper scrutiny in this House. I hope that the OBR and the Bank of England will in time formally agree their working relationship.
We consider that a crucial way to secure the independence of the OBR is to ensure transparency in its funding so that the budget responsibility committee is not at the mercy of the Treasury and vulnerable to the whim of the Chancellor. Comparisons with other countries were made earlier. In Canada, the Parliamentary Budget Officer published two critical reports of the Government in its first year. It is difficult to divorce that from the fact that its budget was frozen, despite promises that it would be increased by a third. Some people would say that that was not a coincidence.
Likewise, Sweden has a similar organisation to the OBR in its Fiscal Policy Council, which reported that its resources were not sufficient to enable it to carry out its remit properly. In response, the Minister for Finance suggested that the council’s budget be cut. We obviously want to avoid a situation like that, and we have received assurances from the Economic Secretary that the OBR’s funding is secure for the next five years. We very much welcome that.
Much of the OBR’s decisions and remit will be based on the charter, so it is disappointing that we have not had the opportunity to scrutinise the revised charter today alongside the Bill given that it is so central to the OBR. The Economic Secretary has assured us that it will be published promptly after Royal Assent, which we expect in no time at all, so we look forward to a full debate on the charter in the Chamber before too long.
Although we support the principle of the OBR and the Bill, we have reservations about how the OBR will work in practice. A major concern is the Treasury’s insular conception of economic policy and sustainability, which seemingly allows it to focus narrowly on the deficit and to ignore the consequences of its own policies. Rising unemployment, rising inflation, as seen in today’s figures, and falling growth are not sustainable and cannot be ignored, so we hoped that the Government would allow the OBR the latitude to take into account those crucial determinants for the long-term recovery, even if the Treasury will not. Unfortunately our amendments were rejected, so we could not enshrine that in the Bill, but we hope that a truly independent OBR will include those matters in its remit. The House may well return to the definition of “sustainability” and the issue of intergenerational fairness when we come to debate the revised charter.
During Labour’s last Budget, the present Prime Minister was fond of claiming that our growth forecasts did not match those of the independent experts. In fact, they were consistently much more reliable than he made out. He concluded:
“What we need is a proper independent office of Budget responsibility, which we would set up to set independent forecasts and to keep the Chancellor honest.”—[Official Report, 24 March 2010; Vol. 508, c. 268.]
I agree with the present Prime Minister, for once, about the need for that, but as is so often the case, the reality does not match his rhetoric. Now we have the OBR, but its independence has been undermined by the release of favourable figures in time for a recent Prime Minister’s Question Time.
Moreover, the British Chambers of Commerce has described the OBR’s growth forecasts as “too optimistic”, and despite the Prime Minister’s concern that official forecasts should match those of independent experts, it seems that other independent experts disagree with the Government’s independent experts. In February, the consensus forecast for 2011 was 1.9% growth, which was downgraded to 1.8% in March, whereas the OBR forecast was a more optimistic 2.1%. The discrepancy increases for next year’s forecast. The consensus forecast is 2.1%, compared with the OBR figure of 2.6%, which it has already had to downgrade once thanks to the Government’s policies.
The differences between the OBR and consensus forecasts could be critical. The Institute for Fiscal Studies, which the Government seem to respect on the occasions when it says anything favourable about their policies, has reported that they will fail to achieve their fiscal mandate to
“achieve cyclically-adjusted current budget balance by the end of the rolling, five-year forecast horizon”
if growth does not meet the OBR’s central economic forecast. Whether the Chancellor will achieve his fiscal mandate is clearly in the balance, and although he may use the OBR figures, it would be a great mistake if we held the OBR responsible for whether he fulfils that mandate. Only the Treasury can determine that.
Fundamentally, and finally, we have to remember that the Bill places no enforceable obligations on the Chancellor for responsible fiscal policy. The OBR can report on the state of the economy, and its analysis will no doubt be very valuable, provided it is genuinely independent. However, the Government already have a track record of ignoring expert advice and indisputable evidence that their policies are failing.
The British Medical Association and almost every health organisation that we care to think of warned against the Health Secretary’s reckless experiment with the national health service, but with the Prime Minister’s full backing, he ignored the evidence and carried on regardless. The IFS published independent research proving that the Government’s June Budget and comprehensive spending review would disproportionately hurt women and children and the most vulnerable people in our big society, but the Chancellor ignored the evidence and carried on regardless.
The Office for National Statistics reported that unemployment had reached a 17-year high and that youth unemployment was at its highest level ever, and the OBR itself reported that the Tory-Liberal Democrat plans would mean 110,000 more people on the dole by the end of this Parliament, but did the Chancellor and the Secretary of State for Work and Pensions review their policies in the light of that evidence? No, they ignored the evidence and carried on regardless.
The OBR downgraded growth forecasts after the coalition’s emergency Budget, and again as a result of its comprehensive spending review, and the economy contracted by 0.6% in the last quarter of 2010, proving that the Government’s policies had undermined the economic recovery, but the Chancellor ignored the evidence and blamed it on the snow. The question for the House is whether we can do enough to secure the status of the OBR so that ideologically driven Ministers cannot just disregard its reports.
Kerry McCarthy
No, I am just drawing to a close.
I urge the Minister to ensure that the principles of objectivity, transparency and impartiality are respected, particularly when she lays the revised charter before the House. Most importantly, we seek assurances that Ministers will actually listen to the evidence provided by the OBR and respond accordingly.
When the Chancellor came to office, unemployment was falling, growth was predicted at 2.3% for this year, inflation was lower and falling, and borrowing had come in £20 billion lower than was forecast in 2009. I do not need to tell the House again how the Chancellor has reversed that recovery, but that is the context in which we must consider the role of the OBR. The office is intended to report on responsibility, but it cannot guarantee responsibility. That is the Chancellor’s role, and it is about time he realised it.
Fuel Prices and the Cost of Living
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Budget Responsibility and National Audit Bill [Lords]
Matt Hancock Excerpts(13 years, 4 months ago)
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Ms Angela Eagle (Wallasey) (Lab)
The Bill makes changes to the responsibilities exercised by the Treasury in fiscal policy making, establishes the interim Office for Budget Responsibility on a permanent statutory footing and modernises the governance arrangements of the National Audit Office. I wish to make it clear at the outset that we support the sensible changes to the governance of the NAO which, as the Minister pointed out, are proposed in parts 2 and 3 of the Bill. We do so not least because they were our reforms. As she was good enough to observe, we set them out in the Constitutional Reform and Governance Bill towards the end of the previous Parliament. As someone who has served three times as a member of the Public Accounts Committee—once in opposition, once in government and once as a Treasury Minister—I am glad to see the reforms getting on to the statute book, despite the extra obstacle presented by the intervention of a general election. I also wish to thank the Minister and the Government for the open mind that they showed to Labour amendments during the passage of the Bill in the Lords. I hope that she will show a similar approach to the amendments that we will table in Committee.
The creation of the OBR seeks to apply to one narrow part of the UK’s fiscal institutions some of the autonomy that Labour brought to monetary policy when we made the Bank of England independent—of course, we took steps to make the Office for National Statistics independent too. As the House of Commons Library has pointed out, there are examples of similar bodies in other countries. Austria, Belgium, Canada, Denmark, Hungary, Holland, Slovenia, Sweden and the USA all have some arrangements for independence in forecasting and analysis of the national fiscal situation.
The reform was initially sold by the Chancellor, with much fanfare, as one that would take the politics out of economic forecasting. In doing that, he gave the entirely false implication that previous Ministers had somehow been instructing hapless officials in the Treasury to produce incorrect but politically convenient forecasts. The reality is that the previous Government published a range for gross domestic product growth, and in all the years before the crash on only two occasions did growth fall below the range that the Treasury published. In the other years, the figure fell either within the range or above it, thus showing that we were exercising caution. We were not fiddling the figures. That level of accuracy is about all that any of us can expect from economic forecasting, which is a notoriously unreliable art rather than an objective science. Let me share a quote with the House:
“Economic forecasting, by its very nature, is subject to uncertainty. Our judgement is that, at this stage of the economic cycle, the outlook is even more uncertain than usual.”
That was the OBR’s comment on its forecasts in June 2010.
However, I have found evidence of one occasion when a Chancellor overruled the Government’s forecasters, and the House may be interested to hear about it. In 1996, the then Chancellor, who is now the Secretary of State for Justice, was reported to have increased the growth forecast from 2.5% to 3% in order to make way for pre-election tax cuts. The chief forecaster he overruled was, by some odd coincidence, Sir Alan Budd, the curiously short-lived first head of the interim OBR.
Matthew Hancock (West Suffolk) (Con)
I am sure that the hon. Lady was not about to move on from talking about forecasts having spoken only about growth forecasts, not about the previous Government’s dreadful record on fiscal and deficit forecasts.
Ms Eagle
The important thing to note about forecasts, particularly those on the tax take, is that it is difficult to be accurate with them. When I served on the Treasury Committee prior to becoming a Treasury Minister, there was comment on how accurately the Treasury was able to forecast the tax take. Clearly, it is more art than science, so the House would be mistaken to believe that because something has been forecast, it is automatically an objective certainty. Those of us who deal with these issues, on both sides of the House, know that forecasting the economy can be as uncertain as forecasting the weather—Michael Fish found out how uncertain that can be one night. Forecasts are what they are; they can sometimes be wrong and sometimes they can be accurate. I honestly think that, in general—I am not making a party political point—the Treasury has a reasonably good record on forecasting.
Matthew Hancock
I enjoy debating with the hon. Lady, so I am extremely grateful to her for giving way. She has just prayed in aid the OBR, saying that it had forecast that the deficit would fall, but she has also said that under the Government’s plan the deficit will not fall. The OBR’s forecast is based on the Government’s plan, so does she agree with herself or not?
Ms Eagle
This is how we can get into difficulty with forecasts, which are static when they are made but apply to a dynamic situation. The hon. Gentleman knows, for example, that our debates in the House are, in part, about the effects on growth of a drastic fiscal consolidation. Our contention has always been that cutting too far too fast will suppress growth to such an extent that the deficit reductions that were hoped for will not come about. That is an essential part of the economic debate that, as far as I can see, we have been having since the Budget in June last year.
Forecasts can be affected by subsequent events and by Government policies. That demonstrates that what matters most is not forecasting for its own sake, but the judgment of the Chancellor of the Exchequer and the Government, and the extreme fiscal choices that they have made.
Mr Mark Field (Cities of London and Westminster) (Con)
Thank you, Mr Deputy Speaker, for calling me so early in the debate. As you know, I have to attend a constituency engagement for which, unbelievably, I am not well enough attired, for it is a black-tie dinner in the City of London. [Hon. Members: “Ah!”] I am supposed to be protected from that lot, Mr Deputy Speaker, so do your level best, please. I apologise that I shall not be here for all the winding-up speeches.
Listening in the House to Budgets and autumn statements over much of the past decade has been, at times, a somewhat surreal experience. Year after year the erstwhile Chancellor, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), rattled out cascading figures for growth and public deficit reduction. As the hon. Member for Wallasey (Ms Eagle) rightly pointed out, the growth figures proved, at least until the middle of the previous decade, to be uncannily accurate, even often defying so-called expert opinion. However, the deficit numbers were always hopelessly, devastatingly inaccurate.
Almost comically, although this can scarcely be regarded as a laughing matter, every single Budget between 2001 and 2007 forecast that the public finances would move back into surplus in about three or four years. As time wore on, the debt and annual deficit rose inexorably as the Treasury employed smoke and mirrors to conjure the illusion of fiscal stability.
Matthew Hancock
The hon. Member for Wallasey (Ms Eagle) cast aspersions on the ability of my right hon. and learned Friend the Member for Rushcliffe (Mr Clarke), now the Justice Secretary, to forecast, saying that in 1996 he forecast more than 2.5% growth. Information has reached me that in 1997 growth was more than 3%, so it turns out that he was right. What does my hon. Friend make of that?
Mr Field
My hon. Friend makes an extremely good point. In the one case in which the hon. Member for Wallasey (Ms Eagle) tried to argue that there had somehow been untoward behaviour by the last Conservative Government, events have proven, if anything, that they surpassed what had been expected.
Alec Shelbrooke
As the hon. Lady suggests, previous forecasts and attempts at caution came from many different angles. The public will recognise that the OBR is giving us a proper set of figures that can be relied on. If the Chancellor of the Exchequer then ignores those figures and ploughs ahead, not only would the calls from the Opposition be deafening but the public would know that the Chancellor was acting against their interests.
Matthew Hancock
Does my hon. Friend know that in 1995 the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) called for a panel of independent forecasters to express their views on public finances? Does he agree that it is a great shame for the nation that the right hon. Gentleman did not act on that when in government, because it might have meant that there was restraint and, in turn, that he would not have left this country in such a terrible mess?
Banking
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Mr Osborne
Unfortunately, if we sold those shares today, we would lose money as a country. Of course we want to return those banks to the private sector. That is clearly an objective of this Government, and I suspect that it will be an important issue in this Chamber during this Parliament. The hon. Gentleman makes a very good point: a huge sum of money was put in to bail out the banks and no conditions were attached. With all the things that I have talked about today and all the things that the shadow Chancellor asked about, such as pay and transparency, when the previous Government had the leverage, they did not use it. Unfortunately, we have to deal with that inheritance.
Matthew Hancock (West Suffolk) (Con)
Yesterday, before the Public Accounts Committee, Treasury civil servants explained that the previous Government had the opportunity to seek to put constraints on this year’s bonuses at the partly state-owned banks, but that they chose not to. Is the Chancellor disappointed by that?
Mr Osborne
I am not only disappointed by it; it has been a constraint in what we have been dealing with. It is very explicit—[Interruption.] The shadow Chancellor says this is rubbish, but that was the agreement that he and his colleagues signed up to. That is the problem on this issue, and I think that that is beginning to dawn on them. They have a past—they have a record. It is a record of letting the City get away with murder, and of the rest of us having to pick up the pieces.
Oral Answers to Questions
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Mr Hoban
My hon. Friend makes an important point. Of course, under the old regime, there was no clawback when bonuses were paid out in cash, and no lock-up. The new code on remuneration introduced by the Financial Services Authority, which is ahead of international practice, has clear rules on deferral, requires that bonuses be clawed back for poor performance, and requires that bonuses for significantly highly paid members of staff—those who take risks—be paid out principally in shares, not in cash. That will ensure that the interests of bankers are aligned with those of shareholders.
Matthew Hancock (West Suffolk) (Con)
How much has the Minister been constrained in his dealings with the majority state-owned banks by the contracts on payments that were signed by the Labour party before the election?
Mr Hoban
My hon. Friend puts his finger on the problem. When the previous Government entered into arrangements to bail out RBS and Lloyds, they limited the period of their involvement in the bonus regime. That is why we had to take action this year and why we have engaged with banks through project Merlin to achieve restraint on bank bonuses. We will make an announcement in the next week.
Bank Bonuses
Matt Hancock Excerpts(13 years, 5 months ago)
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Mr Osborne
We have introduced a permanent bank levy. An argument was made at the general election by Labour Treasury Ministers and the Labour Prime Minister that we should not introduce a levy unilaterally, as it would make Britain uncompetitive. That argument was aired then, and we have now introduced a permanent bank levy. I do not know whether the Labour party supports it or not, but it will raise almost £10 million during this Parliament, and it applies each and every year, rather than being a one-off.
Matthew Hancock (West Suffolk) (Con)
Has the Chancellor noted that in The Guardian this morning, when given the opportunity to support the idea of continuing the bank payroll tax, the right hon. Member for Edinburgh South West (Mr Darling), whom I cannot see in the Chamber, refused to back the opportunistic policy of the Leader of the Opposition?
Mr Osborne
The former Chancellor has clearly made his views known, and I would suggest that he has more credibility on the subject than the shadow Chancellor.
Oral Answers to Questions
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Danny Alexander
We are sticking to the winter fuel allowance. We announced that in the spending review, and we have not changed our position. In addition, we have made permanent the £25 a week level of the cold weather payment. The previous Government had planned to return it to £8.50 a week. Imagine what that would be doing now to the millions of families who are suffering in the cold.
Matthew Hancock (West Suffolk) (Con)
What assessment has the Chief Secretary made of the impact of the CSR on business confidence, and especially the ability to take on new people? For instance, the Dalton’s peanut factory in my constituency is taking on more people because of the confidence in the stability plans set out by the Government.