Public Service Pensions Bill
Rachel Reeves Excerpts(12 years ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Rachel Reeves (Leeds West) (Lab)
With advances in medical science meaning people are living longer and a pressing need to ensure that our public finances are on a sustainable path, it is right that we put in place the long-term reforms we need to manage the cost of public service pensions. That is why when in government we took important steps to ensure public service pensions were sustainable, and it is why we regret that this Government have behaved in a way that has made reform harder and that has undermined confidence in occupational pensions for teachers, nurses, police officers and others who work in the public sector.
We remain of the view that the Government’s imposition of steep contribution increases across the board and a permanent switch in the uprating of pensions to a lower measure of inflation were unfair and unnecessarily provocative. However, we support in principle the Bill’s main measures.
David T. C. Davies (Monmouth) (Con)
Do the hon. Lady’s comments mean that if she were the Minister, she would reverse that Government reform?
Rachel Reeves
We have said that we support the shift from the retail prices index to the consumer prices index for the period of this Parliament to reduce the deficit, but we do not support a permanent shift from RPI to CPI that will continue long after the deficit has been eliminated. I will discuss shortly some evidence from the Pensions Policy Institute and the Royal Statistical Society on the appropriate measure of inflation for uprating pensions.
Andrew Gwynne
My hon. Friend realises that the vast majority of public sector workers do not have massive gold-plated pensions. Instead they have very modest pensions, and they are concerned about their employment prospects as well as their contributions. Does my hon. Friend agree that those are the kinds of concerns that people out in the real world we speak to are talking about?
Rachel Reeves
My hon. Friend is entirely right. The average public sector pension in payment is under £6,000 a year, and it is considerably less for women who work in the public sector, so we are not talking about huge pensions in the vast majority of cases. Instead, we are talking about modest pensions to which people have contributed throughout their working lives.
We support in principle the main measures in the Bill, however, so we will not oppose it on Second Reading, but we will work in Committee to improve it, in order to ensure that it underpins, rather than undermines, the progress made in negotiations. We will seek to ensure it facilitates a smooth and stable transition to new scheme designs, entrenching good standards of governance, transparency, administration and consultation, thereby allowing those who give their working lives to serving the public to save for their retirement with confidence, while establishing a workable system for managing change and controlling costs to the taxpayer.
The Government and public service employees do need to find ways of adjusting to the welcome fact that people are living longer. In government, Labour had agreed and established a framework for negotiating reform and the “cap and share” mechanism to manage long-term costs, and it was always clear that this would mean increases in contributions and, as the population lives longer, a rise in retirement ages.
We have always said that the Hutton report provided a useful starting point for negotiations. Lord Hutton was right to suggest that career average schemes could be fairer than final salary schemes, and we think his proposal that public service pension ages should rise with the state pension age is right in principle. Lord Hutton also stressed the need to approach these issues in a careful and balanced way, however, with particular care for the affordability of any additional contributions for lower paid public service workers, and for avoiding fuelling a race to the bottom on pension provision. Reform needs to be fair to taxpayers and public service employees, as well as being genuinely sustainable for the long term, and that would be endangered by a search for quick cash savings or the playing of political games.
The vast majority of public service workers retire on very modest pensions. The average public service pension in payment is less than £6,000 a year, and even less for women. Tearing up decent public service pension schemes, or imposing punitive and unaffordable contribution increases, would be entirely counter-productive if that resulted in lower saving and inadequate retirement incomes.
Margot James (Stourbridge) (Con)
Does the hon. Lady not accept that the Government have made great strides in protecting low-paid public sector workers in response to Lord Hutton’s report, so that anyone earning £15,000 or less will not have to make any increased contribution at all, and for those earning less than £21,000 the increase will be capped at 1.5%? Surely that is the evidence she requires?
Rachel Reeves
That is simply not true. There are 800,000 part-time public service workers earning less than £15,000 a year, 90% of them women, and their pension contributions will rise by, in some cases, 50% or more because their full-time equivalent salary takes them above the minimum salary threshold.
Instead of building on our reforms, the Government have ripped them up. They have made it much harder to make progress by seeking to impose, prior to any negotiations, a steep 3% rise in contributions and a permanent switch in the indexation of future pension income from RPI to CPI. The “cap and share” arrangements agreed and established by the last Labour Government provided the mechanism for delivering the adjustments as needed, but the current Government chose to undermine that agreement and instead announced a 3% increase in contributions in the October spending review without any discussion or negotiation with employers or employees.
Mr Nick Gibb (Bognor Regis and Littlehampton) (Con)
As the hon. Lady is discussing the previous Labour Government’s reforms, will she say whether she accepts any responsibility on behalf of the Labour party for the decimation of private sector defined-benefit pensions as a consequence of the disastrous decision in the 1997 Budget of the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) to end the repayment of dividend tax credits?
Rachel Reeves
If that was such a disastrous thing, why have this Government not reversed it or made any efforts to do something about it? They have no intention of doing so.
The contribution increases in this Bill were based on no assessment of the future funding needs of public sector pensions and were simply a tax on public service workers who were already facing a pay freeze and redundancy risks. The increases came long before Lord Hutton had published his final report. He warned that excessive increases could hit lower-paid workers hard and result in a counter-productive increase in opt-out rates. He has said that although it is for Ministers to decide by how much contributions should rise,
“there must also be a careful examination of the implications of any possible increase in opt out rates in these schemes as well.”
But the Government chose to plough on, not mindful of the increase in opt-out rates and with little regard for the consequences.
The Government promised that lower-paid workers would be protected from excessive and unaffordable increases, but the reality is that as many as 800,000 part- time workers earning less than £15,000 a year are already paying higher contributions. As I said, for many of them the contributions are 50% higher, because their full-time equivalent salary takes them over the minimum threshold. That approach had nothing to do with long-term reform and everything to do with a cash grab by the Treasury, which made it much harder to deliver progress on the real reform we needed, because the Government acted arbitrarily before Lord Hutton reported and lost the trust of public service workers.
In addition to imposing that hike in contributions, the Government used their June 2010 Budget unilaterally to change the indexation of pensions from RPI to CPI. On average and over time, public service workers will be 11% worse off in retirement as a result. According to analysis published last week by the Pensions Policy Institute, this is a bigger hit than the extra contributions, the raised retirement age and all the other changes to pensions put together. Independent experts, such as the Royal Statistical Society, have emphasised that CPI fails to reflect the spending patterns of pensioners and the rising costs they face. As pensioners worry about the hikes in energy bills this winter and expected steep increases in food prices, we should be particularly mindful of the challenges that retired people face in meeting ever-rising costs.
Again, those changes were imposed on public service workers without any negotiation or discussion. Lord Hutton stated:
“If these reforms have any chance of succeeding then people need to know that they are being treated fairly. We have seen…the anger that has been triggered on the state pension when older women feel the finishing line is being put back at the last minute with very little time to adjust. So there should be full and proper consultation and discussion with the trades unions. That is how we do things in Britain—the public would take a very dim view of any government that fails to honour this basic requirement. We must try and avoid the confrontation and division that marked previous decades and must not turn the clock back.”
I regret to say that the Government did not follow that advice. Sometimes it seems that they are turning the clock back to the conflicts and divisions of the 1980s, and perhaps that was exactly their objective. Their aggressive and provocative approach to these serious and sensitive issues resulted in months of stalemated negotiations and several days of strike action, which resulted in closed schools, cancelled operations, and disrupted lives for families and businesses across the country.
Richard Fuller
There are times when the hon. Lady seems to be making a coherent argument and then she goes back to using rhetoric. She said that the change from RPI to CPI is the most significant one. If she seeks to make amendments on that issue and she does not want to make savings on the basis of a change from RPI to CPI, will she set out where she would make the savings in order to make the overall numbers add up as they are at the moment?
Rachel Reeves
I am sure that the hon. Gentleman has read the Bill. The RPI to CPI change was imposed before it, so it is not contained in the Bill and we will not be able to make any amendments in terms of RPI and CPI when discussing it. The point is that the Government acted arbitrarily before Lord Hutton reported, thus making it harder to deliver the long-term reform to public service pensions that we need.
Labour Members think that those strikes could and should have been avoided last year, and that it is a matter of deep regret that this Government have lost the trust and damaged the morale of millions of public service workers, whose engagement and commitment is vital at a time when they are being asked to accept prolonged pay restraint while delivering continued improvement in the quality and efficiency of public services with fewer resources.
Let me turn from the Government’s mishandling of the issue to the specific provisions in this Bill. The Bill is designed to put the new schemes on a clear and consistent legal footing, with clear lines of accountability to scheme members, public service employers and taxpayers. That, in itself, is a worthwhile objective. I have already emphasised that our big disagreements with the Government’s approach to public service pensions lie elsewhere, so we will not oppose the Bill on Second Reading.
However, we have a number of concerns about the Bill that we hope to address in Committee. It is an ill-prepared and poorly drafted Bill containing a number of mistakes, including giving the wrong dates for the transitions to new schemes. The Bill fails to deliver on the commitments and assurances given by this Government to underpin the provision of decent pension schemes that allow public service workers to save for their retirement with confidence. In short, as we have come to expect from this Government, it is a shambles of a Bill that has not been properly thought through, risks creating more problems than it solves and fails to deliver on the promises that Ministers have made.
First, we think it is right that pension ages rise in line with longevity, but it is essential that that is done carefully and fairly, with due notice given to people whose retirement plans may need to change and due consideration given to the impact of working longer on people in front-line or particularly strenuous occupations.
Derek Twigg (Halton) (Lab)
My hon. Friend makes an important point. Many of my constituents contact me about the impact on pensioners of the wholesale changes that the Government are proposing and have made in respect of this notice period and the fact that people are having to change their plans. That has caused great distress and worry to many of my constituents. I am pleased that she is addressing the point, because the Government seem to be ignoring it.
Rachel Reeves
I thank my hon. Friend for his intervention. We argued exactly the same point when the Government arbitrarily increased the state pension age for women in their late 50s with just six years’ notice given. When Lord Turner carried out the review of state pensions for the previous Government, he recommended a 15-year notice period be given, and the Pensions Policy Institute recommends a 10-year notice period. Such notice needs to be given and it is not enshrined in this Bill.
Andrew Gwynne
Does my hon. Friend recognise that one of the reasons why that notice period is required is that as the retirement age rises careers may also have to change to ensure that employees are not forced into ill health and are not forced to do work that is unsuitable for their age?
Rachel Reeves
I thank my hon. Friend for that intervention. We also believe that this Bill should not pre-empt or cut across ongoing discussions—this builds on the point that he raised, as did my right hon. Friend the Member for Rother Valley (Mr Barron)—between the Department of Health, NHS employers and NHS workers about the implications of working longer for some staff groups, especially those, such as paramedics, in physically demanding roles.
We think that the Bill should reflect Lord Hutton’s recommendations that the link between public service pension ages and the state pension age should be kept under review and that this should be conducted by a properly independent body, with public service employees and employers represented and consulted. The Chief Secretary to the Treasury said in his speech that that will happen, but it is not guaranteed in the Bill—indeed, it is unclear whether it is even compatible with the Bill. These are all issues that we will be raising in Committee to get the commitments that public service workers deserve and thought they had been given during the negotiations behind the Bill. These are also issues that we will have in mind as we look to any future increases in the state pension age itself.
For our finances to be sustainable, and for decent pensions to be affordable, it is right that retirement ages rise with longevity. However, as Malcolm Wicks, the late Member for Croydon North reminded us in some of his most recent work, many people doing manual jobs started work at 16 or 18, with some doing so even earlier, and find it harder to continue work into their late 60s. We should be mindful of people’s capacity to work later and later, especially if support is not in place for them in the workplace.
Secondly, there are real worries that the Bill fails to take due account of the special characteristics of the local government pension scheme. Members will know that it is a fully funded scheme administered by local authorities and we should welcome the hard work of local councils and trade unions, who have made very valuable progress in negotiations on a mutually agreeable agenda for reform. The Bill threatens to unravel the agreements that have been reached and destabilise financially the local government pension funds by forcing a disruptive and potentially disastrous closure of existing schemes instead of facilitating a smooth transition to the new scheme design. That extension of Treasury interference into aspects of scheme valuation and design could prevent local authorities from delivering on the deal they have agreed with their work force. Indeed, the view of the pensions manager at the Chartered Institute of Public Finance and Accountancy is that the relevant provisions in the Bill represent
“a major shift in the governance of local authority pensions and”
raise
“questions about future local democratic accountability for those pension funds.”
Again, we expect those concerns to be addressed in Committee.
Thirdly, on the question of good governance, the Bill must underpin and not undermine high standards of scheme governance. As Lord Hutton stated in his final report,
“there is a powerful case for…much stronger governance of all the public service pension schemes. This should keep government, taxpayers and scheme members better informed about the financial health of these schemes. There should be minimum standards set for scheme administration. There is also a proper and legitimate role for representatives of the workforce to be formally involved in these new governance arrangements.”
The Bill fails to include key recommendations from Lord Hutton’s report, such as the inclusion of member-nominated and independent members on pension boards; the establishment of pension policy groups to consider major changes to scheme rules; the need to ensure that pension boards are responsible for the oversight of financial management and, in the case of funded schemes such as the local government pension scheme, for investment management; and the commissioning of a review into how standards of administration in public service pension schemes can be improved. Those measures would improve the efficiency and cost-effectiveness of scheme administration and would ensure that public service pension schemes matched best practice in the private sector.
Finally, we must ensure that the Bill adequately reflects and reinforces the progress made in negotiations. We should give public service workers a system they can trust and pensions that they can save towards with confidence, ensuring protection against retrospective or arbitrary detrimental changes. We also have concerns in this regard, which some hon. Members have already mentioned, and we will seek to address them in Committee. For one thing, the Bill subjects many aspects of public service pension provision to unilateral Treasury control. Although it is right that mechanisms should be in place to ensure that costs to taxpayers are contained, public service employees also have a right to know that critical changes will be consulted on and that their pension savings will not be vulnerable to arbitrary interference and opportunistic cash raids.
Furthermore, Lord Hutton has stated that
“there must…be full protection of accrued rights”,
but the Bill does not rule out retrospective changes that reduce benefits already accrued, going against the fundamental principle that pension benefits accrued are pay deferred and must therefore be honoured. The Government have reiterated their commitment to maintaining defined benefits in the public sector, and the Chief Secretary reaffirmed that to the House last year. He said, as he has on a number of other occasions, that his commitment was that
“public sector schemes will remain as defined benefit schemes, with a guaranteed amount provided in retirement”.—[Official Report, 2 November 2011; Vol. 534, c. 927.]
Clause 7, however, provides for the creation of new schemes that are
“defined benefits…defined contributions…or…a scheme of any other description.”
That should not be a means to drive a coach and horses through the commitments the Government have given and allow another round in the race to the bottom on pension provision.
In addition, the Government have made much of their promise of
“no more reform for 25 years”.
In his foreword to the Treasury’s document on new scheme designs, published last December, the Chief Secretary wrote that
“we need a long term solution that will last a generation”.
Clause 20 specifies “protected elements” of scheme design that cannot be altered for the next 25 years without clearing a “high hurdle” of comprehensive consultation and a report to parliament.
We think it is right that public service workers should be given an assurance that their pension savings will not be vulnerable to further arbitrary and unfair changes without adequate scrutiny and debate, but the Bill seems to be riddled with loopholes, excluding a number of important scheme features from the list of “protected elements” and stating that the “high hurdle” can be bypassed in order to meet a cost cap that is in turn set by the Treasury with no such requirement for consultation and report. Furthermore, it was a critical part of the agreements reached with employee representatives that protection should be provided to staff transferred to alternative providers as a result of public service outsourcing —the so-called fair deal policy. The Chief Secretary told the House last year that
“we have agreed to retain the fair deal provision and extend access for transferring staff. The new pensions will be substantially more affordable to alternative providers, and it is right that we offer workers continued access to them.”—[Official Report, 20 December 2011; Vol. 537, c. 1203.]
Yet there is no guarantee in the Bill that public service workers transferred to new employers will be able to keep their public service pensions. We will seek to address all those issues in Committee to improve the Bill and the protections granted to public service workers.
In conclusion, we think public service workers with understandable fears for their financial futures deserve better than being treated as pawns in this Government’s political games, with the consequence that it has been harder to reach agreement on reasonable reforms that control costs to the taxpayer. Indeed, perhaps the best case for the Bill is that it should ensure that never again can an opportunistic Government create unnecessary conflict and disruption by imposing unfair and arbitrary changes without adequate consultation, scrutiny and accountability. Let us ensure that it fulfils that objective.
Finally, let us remember that the real pensions crisis is not in the public sector but in the private sector. It is right that we should ensure public service pensions are sustainable and affordable for the taxpayer, but we should not allow that to distract us from the unacceptable inadequacy of pension provision in the private sector. Too often, it has sounded as though the Government’s answer to disparities in pension provision across the public and private sectors is to level down, not level up. Indeed, we have seen more than a million lower paid workers excluded from automatic enrolment when we should be ensuring that the National Employment Savings Trust can deliver low-cost, high-quality pensions to all who could benefit.
Andrea Leadsom (South Northamptonshire) (Con)
Does the hon. Lady accept that in the 10 years since the previous Prime Minister decided to get rid of advance corporation tax relief on pensions, that decision has destroyed £100 billion of private sector pension savings? Does she accept that that was the fault of her Government?
Rachel Reeves
I look forward to the hon. Lady’s private Member’s Bill to restore that relief. The real crisis is that some people are not saving at all for their retirement and are not in any type of occupational scheme.
Rachel Reeves
I shall take another intervention so that we can hear about the hon. Lady’s private Member’s Bill.
Andrea Leadsom
How on earth does the hon. Lady think that anyone can put right £100 billion wiped off the value of private sector pensions? How does she expect anybody to right that wrong today? It has been done; it is too late.
Rachel Reeves
It could be reversed so that dividends were not treated in such a way in the future, but the Government have no intention of doing that. I do not think the hon. Lady understands the real crisis: some people are not saving at all for their pensions and have no occupational pension to save into, and the 20% of people who earn less than a living wage do not feel that they can put money aside every month. That is the real crisis we face and the Government excluded 1 million people from automatic enrolment and have done nothing to tackle the excessive fees and charges automatic enrolment schemes can charge. The Government should be focusing on that challenge to bring up the quality of pension provision for everybody so that nobody risks retiring into poverty and having to rely on means-tested benefits.
Improving governance and reducing costs across private pension schemes while cracking down on the excessive fees and charges that erode pension income should be the Government’s priority, but it is not. Instead, to address disparities they want to level down the pensions enjoyed by those who work in the public sector.
Kelvin Hopkins (Luton North) (Lab)
My hon. Friend is right to draw attention to the pathetic performance of private sector schemes. Is not the answer a compulsory state earnings-related pension scheme for everyone in the private sector?
Rachel Reeves
Automatic enrolment could bring into saving for retirement 10 million people who are currently not saving. They would not just be contributing their own money, but getting a contribution from their employer that they have never had before. That scheme started in October this year and by October 2017 it will be fully rolled out.
The pensions Minister is now in his place. It is disappointing that people on low pay and in part-time work are excluded from that scheme, and that the waiting period was increased to three months, which means that some people who could have benefited from it, particularly those who change jobs regularly, will be excluded. The Government need to do more to bring people into saving for occupational pension schemes through automatic enrolment, and they need to ensure that excessive fees and charges do not erode that pension income. We urged the Government to amend the Pensions Act 2011 to cap those fees and charges, but the Minister did not take those proposals on board.
Lord Hutton argued that public service pensions should remain a gold standard, so let us make sure that the Bill delivers on that objective and then seek to spread that standard across the wider economy so that everyone can benefit from good quality pension schemes. Instead of this Government’s divisive political games, pitting public sector against private sector, union member against taxpayer, we need to work together—Government, businesses, employees and civil society—reforming our economic institutions to give everyone a stake and a fair share in prosperity, building the one-nation economy that our nation needs to succeed.
Infrastructure (Financial Assistance) Bill
Rachel Reeves Excerpts(12 years, 2 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Danny Alexander
The hon. Gentleman will know that the headline plan set out by the previous Chancellor and Government included cuts to capital spending that were substantially greater than those being implemented by this Government.
Danny Alexander
I will gladly take another intervention after responding to the hon. Member for Luton North (Kelvin Hopkins). He will know that the low interest rates to which he has referred are in part a consequence of the fiscal credibility that this Government have established. It is precisely because we wish to use the strength of this country’s balance sheet which comes from that credibility that we are able to announce this guarantee scheme, which I will go on to describe in a moment. However, I shall take an intervention from the shadow Chief Secretary first.
Rachel Reeves
The right hon. Gentleman will be aware that the Office for Budget Responsibility has forecast that the previous Labour Government’s plans would have led to £6.6 billion more investment in infrastructure than that planned by this Government over the next three years. Will he confirm those numbers?
Rachel Reeves (Leeds West) (Lab)
We will not oppose the Bill on Second Reading, but we do not think it remotely adequate to meet the scale of the challenge we now face: the longest double-dip recession since the war, record levels of youth and long-term unemployment, dangerously low levels of business investment, and as a result, deficit reduction way off track, with borrowing up by a quarter this year. The longer this situation continues, the higher the price for businesses, taxpayers and working families in the future: permanent damage to our long-term productivity and competitiveness, and billions of pounds in additional unplanned Government borrowing.
The Opposition have been urging the Government to act and we have repeatedly identified infrastructure investment as an urgent priority. However, this is not the plan it purports to be. The Prime Minister said that he would “cut through the dither”, but he has simply created another distraction—a fig leaf for their own inaction; a peashooter where we needed a big bazooka. At a time when we need to be bold if we are to boost business confidence, to come out with something half-hearted and hesitant risks making things worse.
Before proceeding, I would like to apologise for that fact that, as Mr Speaker and the Chief Secretary to the Treasury are already aware, I cannot be present for the winding up of this debate.
Let us remind ourselves of the background to the Bill. Over the summer, we learned that the UK economy had entered its third quarter of negative growth—the longest double-dip recession in British post-war history. Unemployment remains unacceptably high; youth and long-term unemployment is a national disgrace; and headline employment figures conceal endemic under-employment. Record numbers are working fewer hours than they want to, and record numbers are trapped in temporary work. The Chancellor’s promise of expansionary fiscal contraction has come to nothing.
A Government who proudly proclaimed on page 1, paragraph 1 of their coalition agreement that eradicating the deficit and securing the recovery were their No. 1 priority are now midway through their term of office. What do they have to show for themselves? They have an economy that is smaller than when the Government’s measures began to take effect and, at the last count, £150 billion in additional debt—a figure that is likely to rise further, with borrowing up by a quarter this year. As the former US Treasury Secretary writes in this morning’s Financial Times,
“the reality is that the primary determinant of fiscal health in both the US and UK over the medium term will be the rate of growth. An extra percentage point of growth maintained for five years would reduce Britain’s debt-to-GDP ratio by close to 10 percentage points whereas austerity policies that slowed growth could even backfire in the narrow sense of raising debt-to-GDP ratios and turning debt unsustainability into a self-fulfilling prophecy.”
Hazel Blears
Would my hon. Friend describe this as plan A, plan A-plus, or plan B? [Interruption.]
Rachel Reeves
From a sedentary position, my hon. Friend the Member for Nottingham East (Chris Leslie) suggests “plan F for fail”, and I could not agree more. I wish this was a plan B, but I do not think it is. It is more words, when what we require is action. Yet the Government do not listen to the evidence—they just plough on with a plan that everybody else knows has failed.
Charlie Elphicke
Can the hon. Lady clear up a bit of confusion? Today, she wrote in The Guardian that the Labour party would fix all this with a bankers bonus tax to build new affordable homes. However, it seems that this tax has been spent a number of times. Back in March, the Leader of the Opposition said it was going to be used to fund the young unemployed. Which is it?
Rachel Reeves
The bank bonus tax is being used to do two things: first, to create 100,000 jobs for young people; and secondly, for the construction of 25,000 new affordable homes. The Opposition believe that the priority right now is construction and getting young people back to work. The Government believe that the priority is a tax cut for the bonuses. That just shows how out of touch this coalition Government are.
Nothing better illustrates the long-term costs of this Government’s short-sighted complacency than the shocking shortfall in infrastructure investment. If we want to build a productive, competitive economy for the future, we need to invest in the road and rail systems that keep this country moving; in the energy supplies that power our industries; in the information and communication networks that turn ideas into real innovations. With study after study confirming Keynes’s original insight—that construction projects can maximise the multiplier effects of new investment, creating skilled jobs in the construction sector as well as in engineering and design—there is no better time than now.
Instead, we have had from this Government countless speeches, statements and strategy documents. People are asking, “Where is the delivery?” As the CBI is asking, where are the diggers on the ground? When are we going to start turning blueprints into bricks and mortar? It was the Prime Minister who said,
“This autumn, the government is on an all-out mission to unblock the system and get projects underway”.
That sounds promising—until we realise that he said this a year ago. Since then, what have we seen? None of the road building projects in the autumn statement package have begun construction. The number of housing starts is down on 2011. Planning applications are taking longer to approve. I agreed with the Prime Minister when he said:
“In terms of job creation today, getting construction projects off the ground is critical.”
But in the year since he told us that barely one in 10 of the projects listed in the Government’s construction pipeline have moved forward to procurement or construction, and almost as many of them have moved backwards. Total UK construction output is down by more than 10% and last week’s jobs figures showed that the number of jobs in the construction sector has fallen by 89,000, bringing the total number of construction jobs lost since this Government came to power to 120,000.
The Deputy Prime Minister has promised that support for infrastructure and other private sector projects from the regional growth fund would offer a
“boost to business, which will jump start growth and create jobs that last in the places that really need it.”
That sounds like just what we need, but that was said a year ago. We know that since then just £60 million of the promised £1.4 billion has been released to businesses, creating barely 5% of the 37,000 jobs promised.
The Chancellor of the Exchequer announced £20 billion in new infrastructure investment to be funded by the pension funds—that was a year ago. We now know that this scheme will be launched next year, with funds amounting to only a tenth of what was promised back then. As the failure of this Government’s promises increases, their rhetorical displays have become ever more strident. Two weeks ago, in response to questions from my right hon. Friend the Leader of the Opposition, the Prime Minister said:
“If we look at what is planned by this Government, we see that between 2010 and 2015 we will be investing £250 billion in infrastructure.”—[Official Report, 5 September 2012; Vol. 549, c. 230.]
It is true that the national infrastructure plan sets out £250 billion-worth of projects— would government not be easy if you were judged only on what you had planned? If we look instead at what has been delivered, we see that the picture is rather different. The Office for National Statistics shows that new infrastructure orders since the second quarter of 2010 average less than £2 billion a quarter. At this rate, it will take not five years but more than 30 years for the Government’s grand plan to be delivered. The latest construction output figures released last week show that progress is slowing, not accelerating. It is no wonder that the director general of the British Chambers of Commerce has described the national infrastructure plan as
“hot air, a complete fiction”.
Geraint Davies
My hon. Friend will know that the Prime Minister boasts of an extra 1 million jobs in the private sector. Does she agree that many of those jobs are where people are moving into part-time work having lost full-time work? It is wrong that the Government penalise people who are now working less than 24 hours but used to do more, by cutting their working tax credits by £3,750. The Government are saying, “Get some more work” but these people have just come down from full-time employment.
Rachel Reeves
I thank my hon. Friend for that intervention. He will know that there are 1.42 million people working part time who wish that they were working full time. As of April, about 200,000 families lost support through working tax credits because they could not find the additional hours that they need to still be eligible for that extra support to help them when they are in work; that support helps them to avoid poverty.
It is no wonder that people are asking whether they can have faith in anything the Government are saying, given that in every area we see dither and delay. In communications, the Government have put back the 2012 broadband target to 2015 and may not meet that new deadline. In house building, recent statistics show that new housing starts are down by 24% on a year ago. In waste management, the plan promised for spring this year will now not be delivered until the end of 2013. In energy, the CBI has warned that policy changes such as the cuts to feed-in tariffs have been
“damaging to business confidence, with implications not just for immediate investment decisions but for longer-term trust in government policy”.
In transport, we still await the long-promised national policy statement on transport networks and aviation, and tough decisions on airport capacity have been kicked into the long grass. Instead of the drive, decisiveness and clarity of vision that businesses are crying out for, what do we get in sector after sector? We get dither and delay; we get initiatives and announcements driven by the desire to hit headlines rather than to deliver results.
The Bill—the Government’s latest scheme—is a strange piece of legislation. It is being fast-tracked through Parliament, with the justification that the situation is immediate and urgent. However, given this need for speed, we are bound to ask whether legislation is necessary, particularly given that, as the House of Commons Library note explains, such commitments
“do not typically require…legislation”.
The UK guarantee scheme at the centre of the Bill was first announced by the Prime Minister in a speech in May. It was re-announced by the Chancellor in a speech in June. The press release came from the Treasury in July. It is therefore hard to resist the conclusion that the Bill is designed more to create the impression of activity and delivery than to get real results in the quickest way possible.
However, the Opposition’s biggest concern with the Bill is that it is simply inadequate to meet the challenge we face. Many in industry are sceptical that it will make any difference. Even where it is taken up, the tight criteria of economic and commercial viability may mean that it amounts to only a deadweight subsidy, aiding projects that would have gone ahead in any case. The best anyone has been able to say for it is that it might help some schemes at the margin, but that is hardly commensurate with the challenge we face.
The schemes that have been most frequently mentioned as strong candidates for assistance are those the Government have announced are going ahead several times already. Let me cite one example, which the Chief Secretary mentioned in his speech. Earlier this month, he said:
“Detailed discussions are already taking place with the Mersey Bridge Gateway project”.
We certainly welcome progress, but many may experience a strange sense of déjà vu, given that a year ago the same project was announced by the then Transport Secretary, who noted that although some transport plans are long term, this one could be
“implemented more quickly…creating jobs when they are needed most.”
What happened in the past year? It is no wonder the Government are gaining a reputation for more talk than action. As the director general of the CBI said today,
“firms fear initiative overload and are becoming impatient with delivery, leaving many companies still sceptical about the overall impact on investment.”
Mr William Cash (Stone) (Con)
Does the hon. Lady accept that this Bill is, in effect, pure Keynesianism? If she had the opportunity to read Nicholas Wapshott’s recently published and excellent book on the arguments between Keynes and Hayek, she might conclude that elements in this hoped-for infrastructure programme carry with them the germs of really serious difficulties if we pursue a policy of pure Keynesianism and do not take into account the arguments of Friedrich Hayek.
Rachel Reeves
I look forward to reading the book that the hon. Gentleman mentions, but I do not think that the Bill is pure Keynesianism—that would be doing things that Labour Front Benchers are recommending, such as introducing a temporary reduction in VAT, a tax on bank bonuses, genuinely bringing forward infrastructure investment and a national insurance holiday for small businesses. Those are the things that would kick-start the economy, get people back to work and get the deficit down in a sustainable way, because there would be more people in work and more businesses succeeding, unlike what we have from this Government, which is £150 billion of additional borrowing because more people are on welfare and fewer businesses are succeeding.
Kelvin Hopkins
I compliment my hon. Friend on her excellent speech and may I say that Friedrich von Hayek has caused more damage in this century and the last than any other economist in the history of the world? Nevertheless, she is absolutely right; this is about a supply-side measure which is not Keynesianism. Assisting and providing a little bit of investment with a little bit of Government subsidy is not Keynesianism. Keynesianism is direct spending to create demand in the economy. The private sector will not create demand. Only government can restore the demand where there is the vacuum at the moment.
Rachel Reeves
I thank my hon. Friend for that intervention. Of course he is agreeing with something that the Business Secretary said, which is that the real problem in the economy is a lack of demand. Supply-side measures will not do very much to help with that. When the Chief Secretary was asked in intervention what projects would be supported by this Bill he could name not one. That is the problem; this is a guarantee scheme, but we do not know what it guarantees. This is a project to help infrastructure investment, but we hear no announcement about which infrastructure investments will go ahead that would not have done previously. No wonder businesses and Members are sceptical and no wonder we are still in recession, if this is as good as the Government can get.
We will not oppose the Bill, but nor will we allow the Government to use the scheme as a substitute for the real plan that the economy and businesses so desperately need. Instead of devoting themselves to the task of getting our economy moving again, the Government have put before us an infrastructure investment guarantee that guarantees no infrastructure investment—fast-track legislation that has had the effect of getting the scheme stuck in the slow lane. The Government are preoccupied with distracting us from their fundamental failure and inaction, but people’s patience is wearing thin. We have had enough of initiatives and announcements: no more excuses, no more evasions—the Government need to get serious.
Two years ago, we warned that the Government’s economic plan would choke off recovery, shatter business confidence and add to borrowing, and that it would make it harder, not easier, to balance our books and pay our way in the world. A year ago, we called on the Government to bring forward infrastructure investment; we called for a bank bonus tax to fund the construction of 25,000 new affordable homes and to deliver a programme of youth jobs. If the Government had taken our advice then, just think how much progress we could have made by now.
Jane Ellison (Battersea) (Con)
Before the hon. Lady reaches the end of her speech, perhaps she will comment on this point. If all the things that have not been done are so bad, why did Madame Christine Lagarde say that she shivered to think what would have happened had the Government not taken the action they did?
Rachel Reeves
Olivier Blanchard and the International Monetary Fund have been saying for a year that if growth does not materialise the Government should think again. How much longer do we need to be in recession? How much longer must we have rising youth unemployment and rising long-term unemployment before the Government act? The IMF now forecasts that the economy will shrink this year and will barely grow at all next year. That is evidence that the Government need to rethink their strategy, and it is a shame that they have not heeded the advice of the IMF.
Geraint Davies
Does my hon. Friend agree that the reason consumer demand is so awful is that the Chancellor announced that 700,000 people in the public sector would lose their jobs? People in the public sector do not know whether it will be them or their neighbour, or whether it will be this year or next year, so they are saving not spending. That is why there is no growth.
Rachel Reeves
I thank my hon. Friend for that intervention. It is not just people in the public sector; people in the private sector, particularly in construction, which has shed 120,000 jobs since the Government came to power, are also worried about their jobs and futures and about how they will get the money to feed and house their families. There is real concern and a real lack of confidence among households and businesses.
This summer showed that things could be done differently. The Olympics showed what can be achieved with an inspiring vision—the right combination of public, private and social enterprise, with the nation united behind it. We delivered on time and on budget, and it was a perfect platform for Britain at its best. Let us hope that the Olympics provided a much-needed boost for our economy, but the lesson to learn is not that we can now rest; if we really want to seize the economic opportunities before us and build a better future, we need to repeat that effort on a much bigger scale, with a nationwide plan for jobs and growth. Let that be the lesson for today and let us get to work on laying the foundations of the economy we need to build for the next generation. Let us have a Government who follow up their rhetoric with real action.
Mr Deputy Speaker (Mr Lindsay Hoyle)
Before I call the next speaker, I inform the House that the limit on Back-Bench speeches will be nine minutes.
Oral Answers to Questions
Rachel Reeves Excerpts(12 years, 2 months ago)
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Mr Osborne
I agree that we want to see private sector investment, and tens of billions of pounds of private sector investment is coming into the United Kingdom. Indeed, today the Chinese company Huawei has announced a $2 billion investment in the UK. I absolutely agree with my right hon. Friend. We want to create the low-tax, competitive conditions for the UK economy in which the private sector can grow, but I think he would recognise that there is a role for public money in providing large-scale transport infrastructure, for example, which these companies need to succeed.
Rachel Reeves (Leeds West) (Lab)
In a speech yesterday, the Chief Secretary to the Treasury declared that
“infrastructure is at the centre of our strategy to kick-start our economy.”
With that in mind, will the Chancellor tell the House whether the value of orders for infrastructure investment made by the private sector rose or fell between 2010 and 2011?
Mr Osborne
For a start, we have just announced £40 billion of additional guarantees for private sector infrastructure. If the hon. Lady wants the figures, £113 billion was invested over the period from 2005 to 2010, and £250 billion of investment for both the private and public sectors has been announced in this Parliament.
Rachel Reeves
As the Chancellor will know, there is a difference between announcing something and actually delivering it. The answer to my question is that those orders fell by a fifth, from £7.3 billion in 2010 to £5.9 billion in 2011—a result of the collapse in business confidence that the Chancellor’s disastrous decision to cut too far and too fast has resulted in.
Is it not the truth that next week’s Infrastructure (Financial Assistance) Bill is necessary only in order to create the impression of activity and to distract from this Government’s complete and utter failure to deliver the infrastructure investment that they have been promising and that the country is crying out for?
Mr Osborne
There is a difference between announcement and delivery: Labour announced no more boom and bust, and delivered the biggest boom and the biggest bust. We know all about the record of the last Labour Government. One of the quite extraordinary things is that, despite spending and borrowing all that money, they did not actually invest in the modern infrastructure that the private sector needs to create sustainable jobs. That is the lesson that the hon. Lady should learn from their last period in office.
Finance Bill
Rachel Reeves Excerpts(12 years, 4 months ago)
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Rachel Reeves (Leeds West) (Lab)
I thank my hon. Friends the Members for Pontypridd (Owen Smith), for Newcastle upon Tyne North (Catherine McKinnell) and for Kilmarnock and Loudoun (Cathy Jamieson) and others for serving on the Public Bill Committee with me over the past several weeks. I also thank our able Chairs for supervising us during that process and the Commons Clerks for their advice and assistance throughout the process in Committee and in the House.
The Bill has been on quite a journey since it was first presented to the House just a few months ago. I fear that the Exchequer Secretary spoke too soon last December when he announced that
“the Government’s more open, predictable and simple approach to tax policy making is working well.”
He said that by publishing tax legislation in draft form first,
“we are giving greater certainty and stability to taxpayers and businesses”.
I do not think that taxpayers and businesses, or indeed Members of this House, realised that the Finance Bill itself was still only a draft when it was published in March. This Finance Bill has been through so many stages of crossing out and rewriting that it would have been easier for the Government to have scrapped it and started again, perhaps with some measures that would have supported jobs and growth.
As we have heard throughout the Committee and Report stages, the Budget has been a total and utter shambles. When we first saw this Bill back in March, it contained provisions to raise VAT on hot food, on static caravans and on improvements to listed buildings.
Mr Reid
What was in the Budget back in March was a consultation exercise on VAT on static caravans and so on. I am glad that after that exercise the Government listened and amended their proposals, but it was a consultation. This Government, unlike the previous one, listen to what people say in consultations.
Rachel Reeves
That is the first time I have heard a Finance Bill being called a consultation—I do not even know where to start.
The Budget in March also included a 3p rise in fuel duty in August and limits on charitable donations. All this was necessary, we were told, to deal with the deficit. Yet the Bill before us, as we reach Third Reading, contains none of those measures. We have had a series of abrupt reversals that, according to one estimate, will cost the Exchequer nearly £700 million.
Opposition Members argued that these measures were misconceived from the start, and that adding to the costs faced by families and small business at this time would make it even harder for our economy to climb out of the recession that this Government have dug us into. But it must be a matter of regret that so much uncertainty and confusion has been created for those affected, doing real damage to businesses, charities, pensioners and families, and that at a time of tight public finances the Government’s financial and fiscal planning seems to be in such disarray, with no one at all clear what the Government’s priorities actually are.
Despite the Government’s belated change of heart on those matters, the Bill remains a deeply flawed, unfair and utterly inadequate response to the problems facing our country today and that is why the Opposition will vote against it this evening. The Bill still offends against the most basic principles of fairness by giving priority to a reckless and irresponsible tax cut worth tens of thousands of pounds for a few thousand millionaires while at the same time asking millions of ordinary people who are already under pressure from rising prices, falling wages and cuts to tax credits and benefits to make further sacrifices and endure further hardship.
The Bill breaks a promise that the Chancellor made in the Budget last year to Britain’s pensioners that their age-related allowance would rise in line with inflation for the rest of this Parliament and instead imposes a stealth tax that will hit 4.5 million people over the age of 65, all of whom live on modest pension savings. The Bill is breaking the principle of universal child benefit and still means that one-earner families will lose thousands of pounds a year while a two-earner family on almost twice as much will keep all their benefit. It is a botched, half-baked measure dreamt up for a party conference speech but the measures are described by the Institute of Chartered Accountants in England and Wales as a “policy disaster” that are
“in danger of becoming a practical disaster when they come into effect”.
We have raised a number of other concerns about the Bill, such as the controlled foreign companies changes and the impact that they will have on developing countries. What is most wrong with the Bill, however, is that it represents a massive missed opportunity to end the recession and get our economy working for ordinary working families, pensioners, businesses and young people. It could have been a Bill that took the tough decisions necessary to ensure that those who could make a fair contribution to deficit reduction did so, so that those hit hardest by the current crisis were not put under even more pressure.
It could have been a Bill that cut VAT, giving immediate relief to hard-pressed families and giving our economy the stimulus it needs to get growth under way again and to make unemployment fall. It could have been a Bill that redirected money wasted on excessive bank bonuses and put those resources to better use, helping young people get back to work and constructing new affordable homes.
Rachel Reeves
The Government are borrowing £150 billion more. That is the cost of the Government’s failed economic policies. The reality is that with more people out of work claiming benefits and fewer people in work paying taxes, Government borrowing is higher and not lower.
Jacob Rees-Mogg (North East Somerset) (Con)
I am grateful to the hon. Lady for giving way, but there is a little problem with her maths. She is accusing Her Majesty’s Government of spending £150 billion more and then wants to spend umpteen billions on top of that on a VAT cut. There is absolutely no sense in that.
Rachel Reeves
We have seen that this Government’s plan has failed, as unemployment remains far too high, with a million young people out of work. It has failed, and the economy is back in recession—we are one of only two countries in the G20 that are in recession—and the Government are borrowing more. In fact, in the first two quarters of this financial year, the Government are borrowing £4 billion more than they were last year. Their plan has failed and it is time to try an alternative that gets the economy moving again and that gets people back to work and paying taxes so that the economy can grow and the deficit can be brought down sustainably.
We have proposed a bank bonus tax because we think that it is right that those people with the broadest shoulders should pay a little more. On the day that Bob Diamond has resigned after taking £100 million of bonuses in just a few years, would it not have been far better tonight if we had supported the bank bonus tax and used that money to fund a programme of youth jobs to get our economy working again?
We could have used the Budget and the Government could have used the Finance Bill properly to accelerate infrastructure investment to help the struggling construction industry and to create much needed jobs in our economy. Instead, we have a Bill that will go down in history as a monument to this Government’s incompetence, complacency and inability to grasp that what the current economic situation demands is a Government who stand up for ordinary working people. The Bill fails on fairness and asks millions to pay more so that millionaires can pay less. It fails to address the real challenges that this country faces—a recession made in Downing street and a Government with no plan to get us out of it.
Finance Bill
Rachel Reeves Excerpts(12 years, 4 months ago)
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Mr Gauke
Nobody will lose out in cash terms; that is the point.
Age-related allowances are complex and hard for older people to understand, as the Public Accounts Committee confirmed in a 2009 report. The same report also stated that too much emphasis is placed on older people having to prove their eligibility, resulting in erroneous claims and potential overpayments of tax. Furthermore, in March this year the Office of Tax Simplification published its interim report on its review of pensioner taxation in which it highlighted no fewer than nine complexities with the age-related personal allowance.
Half the people aged over 65 in 2013-14 will pay no income tax at all and are therefore unaffected by these changes. Those who will now not receive an age-related allowance will benefit from a £1,100 increase in the personal allowance, which represents the largest cash increase ever. At the same time, those who are affected by the withdrawal of age-related allowances will still see the total deductions they pay reduce significantly because we have retained the exemption from national insurance contributions for those of state pension age.
It is important to consider these changes to age-related allowances in the context of the wider support that the Government offer to pensioners. Only 40% of pensioners benefit from age-related allowances, about 50% are unaffected by the changes made by the clause because they pay no tax and will continue to pay no tax, and the remaining 10% have incomes above the taper limit for age-related allowances and are therefore unaffected by these measures.
Let us also remember that the triple lock ensures that each year, the basic state pension will be uprated by the highest of these: inflation, earnings or 2.5%. This April, the basic state pension increased by the consumer prices index inflation rate of 5.2%. That meant that there was an increase of £5.30 a week in the full basic state pension—the largest ever cash increase in the basic state pension. Under the previous Government’s plans, the basic state pension would have increased by only 2.8% from this April—an increase of only £2.85 per week. That means that the full basic state pension is £127 a year higher in 2012 than it would have been under the previous Government’s plans. Next year, a full basic state pension is forecast to be £130 a year higher than under the previous Government’s plans, and the year after that, it is forecast to be £133 higher.
Each year, more than 11 million pensioners will benefit from the introduction of the triple lock. An existing pensioner with a full basic state pension will gain more from the triple lock in each of the next three years than they will lose from the freeze in age-related allowances. The Institute for Fiscal Studies has said:
“Our analysis shows that they have lost considerably less from recent tax and benefit changes than any other demographic group. And over the past decade and more pensioner incomes have risen faster than those of the working age population.”
To conclude, the Government are making changes to ensure that there is a fair and competitive tax system. Some of them are controversial, but we should look at the evidence, not the Opposition’s rhetoric. The 50p rate is not sustainable. The introduction of the triple lock on state pensions means pensioners continue to be better off. These changes are good for our long-term tax revenues, good for our economy and good for the UK as a whole. I ask the Opposition to seek leave to withdraw the amendment.
Rachel Reeves (Leeds West) (Lab)
It is good to have plenty of time to wind up for the Opposition. We will press for a vote on amendments 1 and 23 this evening, because as today’s debate has confirmed for anyone who was still in any doubt, this is not only an omnishambles of a Budget, as my hon. Friend the Member for Livingston (Graeme Morrice) said, but a flawed and unfair Budget.
We have heard contributions about the hardships that the Government’s economic failure and unfair austerity measures are causing for our constituents. My hon. Friend the Member for Hackney South and Shoreditch (Meg Hillier) talked about the cuts beginning to bite. She rightly said that pensioners are the victims and millionaires are the victors from the Budget. My hon. Friend the Member for Wansbeck (Ian Lavery) said that the tax cut for millionaires is worth more than the money that most of our constituents take home in a year. The hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) spoke about a tax cut for the mega-rich that leaves a bad taste in the mouth.
Instead of taking serious steps that might repair the damage that has been done, the Chancellor and his Ministers have turned from their failed experiment in expansionary fiscal contraction and resorted to the notorious Laffer curve. As my hon. Friend the Member for Brent North (Barry Gardiner) said, they are testing that economic philosophy to its limits. It is their latest excuse for an economic policy that rewards those who are already very wealthy and is the last refuge of a Government who have lost any sense of purpose beyond the protection of privilege.
The argument that cutting tax for the very richest is the only way of improving the economic prospects for the rest of us was made by the hon. Members for Amber Valley (Nigel Mills) and for Dover (Charlie Elphicke). They were suggesting that cutting taxes for the rich is what makes them work harder, but that cutting benefits for the poor is what gets them out of bed in the morning. They were saying that although these policies will hurt their constituents, they will vote for them anyway. I am sure that their constituents will sit up and take notice.
It is the same old Tories dusting down the same old trickle-down theories. They did not work in the 1980s and they will not work today. As my hon. Friend the Member for Edinburgh East (Sheila Gilmore) said, the Government seem to think that if they cut taxes for the richest, somehow the rest of us will be the beneficiaries. Nothing could more clearly demonstrate the Government’s perverse priorities than the fact that, when ordinary families are going through the toughest times in living memory, clause 1 of chapter 1 of part 1 of this Finance Bill gives a £3 billion tax cut to the richest 1% of the population, and the rest of the Bill is peppered with dubious means of making other, far less fortunate people in society pay for it.
Among those means, the largest and most flagrant is the abolition of the age-related allowance. The Government call it a tax simplification; we call it a tax grab from pensioners with occupational pensions of little more than £5,000 a year. As my hon. Friend the Member for Wansbeck said, it will cost pensioners £83 and people coming up to retirement £323.
May I just say how disappointing it was—
LIBOR (FSA Investigation)
Rachel Reeves Excerpts(12 years, 4 months ago)
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Rachel Reeves (Leeds West) (Lab)
I start by thanking the Chancellor for advance notice of his statement, which was handed to me at 12.19 pm—two minutes before he delivered it. [Hon. Members: “Where’s Balls?”] As my right hon. Friend the shadow Chancellor is addressing the Local Government Association’s annual conference in Birmingham, I am responding for the Opposition.
Nine months ago, the Leader of the Opposition talked about “irresponsible, predatory capitalism”, of which this is one of the worst cases yet. The public had been assured that the banks had cleaned up their act. Ordinary borrowers and savers were told they could trust the banks again, but these unfolding revelations shine a new light on shocking practices in one of Britain’s most important banks. What should have been an impartial process of reporting independent interest rate statistics became an exercise in cooking the books, cheating the system and fixing the market.
Financial stability and the effective regulation of our banking and wider financial services industry are vital for stability, for consumers to save and for businesses to invest. Getting the balance of regulation right is an important task for the Government, especially when hundreds of thousands of jobs depend on the industry and when all of us and small businesses in all our constituencies rely so much on the financial services sector.
There are three areas in which I have questions for the Chancellor, the first of which is dealing with the people who are responsible. Are those responsible in the banks being held—[Interruption.]
Mr Speaker
Order. This is an extremely serious matter which warrants serious consideration. Let it be absolutely clear to hon. Members on both sides of the House that if they want to shout out, they will not be called to ask a question on the statement. They should not shout, but if they think they are going to shout and then be called to ask a question, I am afraid they are rather deluded.
Rachel Reeves
Thank you, Mr Speaker. I could not agree more with you about the importance of this issue.
On dealing with those who are responsible, are those responsible in the banks being held accountable, or will this whole thing just return to business as usual? Are criminal investigations progressing, and which law authorities will be leading the conspiracy and fraud cases that might arise? Has the Chancellor reflected on the consequences for competition and has he considered involving the Office of Fair Trading, the Serious Fraud Office or the City of London police? We need to know who knew what and when, and criminal prosecutions should and must follow against anyone who might have broken the law.
Millions of home owners with variable rate mortgages, small businesses with floating loans and consumers who depend on affordable credit could have lost money because of what amounts to a price-fixing scandal. What support will be available for individuals and small businesses who have potentially lost out because of the market fixing and who contact the Financial Ombudsman Service or the bank directly? Is the FSA also investigating the role of the bank’s auditors in tracking and reporting the manipulation of the figures between the rate submitters and the traders involved? What is happening to ensure that other banks that have manipulated markets in a similar way are brought to justice?
Secondly, what is being done to prevent anything like this from happening again? We raised our concerns with Treasury Ministers about the regulation of LIBOR recently. On 6 March, during a debate on the Financial Services Bill about the set of unregulated financial activities that the Chancellor evidently felt should remain unregulated, the shadow Financial Secretary, my hon. Friend the Member for Nottingham East (Chris Leslie), asked the Financial Secretary directly about the
“billions of pounds of trades that are subject to the LIBOR rating”––[Official Report, Financial Services Public Bill Committee, 6 March 2012; c. 359.]—
and why that might need to be regulated. When asked whether he had a view—any view at all—about ending self-regulation, the Financial Secretary to the Treasury had a one word answer: “No.”
The Chancellor made a conscious decision to exclude LIBOR from the Financial Services Bill in its current form, even when he must have known that a massive FSA investigation into precisely that matter was under way. The reputation of the City of London and our financial services sector is at stake. Instead of Ministers’ saying that the Treasury has no view, surely we need swift action to prevent the market abuse? Will the Chancellor urgently revisit his decision not to regulate LIBOR arrangements and instead amend the Financial Services Bill, which is still before Parliament?
Thirdly, a much wider issue is the culture in the City of London. As Bob Diamond said only last year, culture is about
“how people behave when no one is watching,”
but people in his organisation thought they could do anything they liked, just to make a fast buck. They thought they would never be held to account and that they were effectively above the law. We cannot allow Britain to become a place where the privileged and the powerful act according to their own set of moral standards. That is why we are calling for the strongest punishment for those who have broken trust and broken the law, tough regulation to prevent such practices in future and a culture change in our banking industry. We must get our economy working for the majority, not just a few at the top. The Government must act.
Mr Osborne
The whole House will be both surprised and disappointed that the shadow Chancellor is not here to account for himself today. He was certainly there every single day while these abuses were taking place, as the City Minister responsible for regulating Barclays and other banks. The hon. Lady says that the Government should do this and that. We are doing all those things; the question is why did the Labour Government not do those things when all this was actually happening?
Let me answer the hon. Lady’s specific questions. She asks whether the individuals responsible will be held to account. Absolutely, and the authorities are carrying out investigations into individuals. She asks whether people who have broken the criminal law will be held to account. That is absolutely what the authorities are looking at but as I have said, the FSA’s criminal powers granted by the previous Government do not extend to criminal sanctions for manipulation of LIBOR. [Interruption.] The hon. Member for Nottingham East (Chris Leslie) asks, “Why is it unregulated?” It is because he did not regulate it—that is why. We are introducing a major Financial Services Bill, which has been through the House of Commons and is going through the House of Lords, to deal with the abuses that happened under the previous Government.
Secondly, the hon. Lady talked about the regulation of LIBOR. Of course the Government have been reviewing LIBOR while awaiting the publication of this report, which we knew was coming. As I have said, we have considered it carefully and we are looking at criminal sanctions for market manipulation. The hon. Lady did not ask about this, but it is an important point so I shall repeat that we are looking at what can happen to the fines levied on companies under the Act passed by the previous Government. Those fines are used simply to reduce the levy that is paid to the FSA by the rest of the financial sector, so the money paid by Barclays would just go to reduce the levy paid by other banks to the FSA. We are considering changing that, looking at whether that is appropriate in all cases and, specifically, whether the fine that Barclays will pay can go to the general taxpayer, who has suffered so much as a result of the failures of the financial system.
Finally, the hon. Lady talked about a culture change in the City and in banking. I completely agree. That is why the Government have introduced very tough new rules on remuneration and the clawback of remuneration, which is what will happen in this case. It is why we asked John Vickers to look at the whole structure of our banking industry, and the Business Secretary and I are implementing reforms that will ring-fence our retail banks to protect them better. It is why we have before Parliament as I speak the Financial Services Bill, which will sweep away the financial regulatory system that failed this country so badly. The Labour party’s trouble is that it is led by the cheerleaders for the age of irresponsibility, but they have yet to say sorry for it.
Oral Answers to Questions
Rachel Reeves Excerpts(12 years, 5 months ago)
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Danny Alexander
I am grateful to my hon. Friend for that question. He is, of course, right to say that the recent figures show that unemployment has been falling, and that is good news, of course. Inflation is also coming down, which is good news for hard-pressed consumers.
Rachel Reeves (Leeds West) (Lab)
Does the Chief Secretary think the fact that the economy is in recession explains why today’s figures show that borrowing is going up, not down as the Government intended?
Danny Alexander
As I said to the right hon. Member for East Ham (Stephen Timms), the figures reflect a combination of things, including the fact that departmental spending has been held down by more than was forecast, but the automatic stabilisers in the economy are operating. That is the flexibility in our plan. It is because of the fiscal credibility the Government have brought to this country that we can do that.
Rachel Reeves
I do not think the Chief Secretary answered the question. Figures out this morning show that, with the economy in recession, tax receipts are falling, and the benefits bill is going up, so borrowing is already £4 billion higher this year than last. Is it not time that the Government admitted their plan has failed, and without action on jobs and growth, borrowing does not go down, it just goes up?
Danny Alexander
That is an astonishing question from the party that made the mess in the British economy that we are trying to clear up, and the party whose plans wanted this Government to borrow even more. That just goes to show what would have happened to the UK economy if we had been unfortunate enough to have the Labour party stay in power.
Changes to the Budget
Rachel Reeves Excerpts(12 years, 5 months ago)
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Urgent Questions are proposed each morning by backbench MPs, and up to two may be selected each day by the Speaker. Chosen Urgent Questions are announced 30 minutes before Parliament sits each day.
Each Urgent Question requires a Government Minister to give a response on the debate topic.
This information is provided by Parallel Parliament and does not comprise part of the offical record
Rachel Reeves (Leeds West) (Lab)
(Urgent Question): To ask the Chief Secretary to the Treasury to make a statement on the changes that the Treasury has made to the Budget, which was presented to this House on 21 March 2012.
Rachel Reeves
I thank the Minister for his answer, but regret the absence of both the Chancellor and the Chief Secretary to explain this series of U-turns.
This statement leaves a number of questions unanswered. On 16 April, the Exchequer Secretary told the House:
“The same approach should apply to mobile caravans as to static, non-residential caravans, and to a hot pie served in a fish and shop and one served in a bakery.”—[Official Report, 16 April 2012; Vol. 543, c. 130.]
On 12 April, in relation to the proposed cap on income tax relief for charitable donations, he said:
“The policy that we’ve announced is a sensible one.”
What new evidence has come to light since then and during the recess that has led the Government to change their mind? The reality is that the facts have not changed. This is a Government who do not like to be held to account for their mistakes. The Minister has tried to make a virtue out of the Government’s abandonment of policies that prove to be unpopular and unworkable by saying that they are listening. However, failing to do the necessary work on a policy before announcing it and then sneaking out a reversal when they hoped no one was looking is not consultation—it is total incompetence. Is it not the truth that this Government were so desperate for money-making measures that they took from whomever they thought they could, hoping to get away with it? The result: a total and utter shambles of a Budget.
The mistakes that are still in the Budget are, however, the worst ones of all: a tax cut for millionaires while asking millions to pay more, and no plan for the jobs and growth that we desperately need to get our economy back on track and our deficit down. As the Minister and his colleagues are making such a virtue of listening and of their readiness to change course and make the occasional U-turn, perhaps now they will listen—to the millions of pensioners hit by the granny tax; to the millions of families hit by cuts to their tax credits; to the 1 million young people out of work; to the businesses struggling to break even; and to everyone in this country suffering from the double-dip recession made in Downing street and crying out—[Interruption.]
Mr Speaker
Order. The House needs to calm down, on both sides. I remind the shadow Chief Secretary to the Treasury that the narrow focus of the question covers changes to the announced policy. I know that she will concentrate on that narrow matter, as this is not a Second Reading debate on the Budget.
Rachel Reeves
Given the number of U-turns that the Government have made in the past two weeks, it is difficult to know where to start. Will they now change course on the biggest mistakes in the Budget—cutting tax credits for working families, the granny tax and cutting tax for millionaires while asking ordinary people to pay more? The country is crying out for the Government to change course and to get a grip on their policies, which dug us into this hole and this recession.
Mr Gauke
The hon. Lady says that the Government were desperate for money-making measures. Why does she think we needed such measures? She might have noticed that her party left the biggest peacetime deficit we have ever faced. The extraordinary thing about the Labour party is that it always believes that there is a magic money tree that we can get money from. I am afraid, however, that we have to take steps to reduce the deficit. Even with these changes, we remain on the course that we set out. This was a fiscally neutral Budget, and we are not taking risks with the public finances, which is the U-turn that the Opposition want us to take.
The hon. Lady asked how a Budget could be changed and why we had departed from what it set out to do. I should like to remind the House what happened four years ago. In 2007, the then Chancellor of the Exchequer announced the doubling of the 10p rate. A year later, his successor had to come to the House—not in a Budget, but weeks later—and set out additional tax cuts of over £3 billion. They had got their policy wrong and they had destroyed their credibility by doubling the income tax rate for the poorest earners in this country. That is an example of a Budget shambles.
Public Appointees (Tax Arrangements)
Rachel Reeves Excerpts(12 years, 6 months ago)
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Rachel Reeves (Leeds West) (Lab)
I thank the Chief Secretary for his statement and for providing advance notice of it. We welcome this review of the pay and tax arrangements of senior public servants.
At a time when ordinary families and businesses are bearing the brunt of the recession that this Government have created and at a time when more than 700,000 jobs in the public sector are being cut while ordinary public service workers who keep our NHS, schools and police services running have had their pay frozen and their pension contributions increased, people will be shocked that more than 2,000 senior public servants, many earning several times the average public sector wage, have been paid in a way that allows them to avoid paying their fair share of tax, and that 1,200 of these deals have been done by the present Government in the past two years.
The vast majority of working people in this country have no choice over how or whether to pay the tax that they owe and they will feel that those who benefit from the highest public sector salaries have a special responsibility to make their proper contribution to the funding of the public services on which we all rely and to which they owe their generous salaries. We should all be clear that if the taxpayer is paying someone a living, particularly a better living than the vast majority of taxpayers enjoy, that person has a duty to pay their fair share of tax and the Government have a duty to ensure that they do so.
The statement is a valuable step towards greater transparency and accountability and we welcome that, but I have a number of questions that I hope the Chief Secretary can answer today. First, on the question of the chief executive of the Student Loans Company, we now know that he was appointed at a salary significantly higher than that of his predecessor and that he potentially avoided paying around £42,000 annually in tax, an amount almost twice the average public sector salary. Will the Chief Secretary tell us which members of the Government agreed to the arrangement made with the chief executive of the Student Loans Company and which members of the Government were aware of the arrangements before the matter came to the public attention in February? Have changes been made to his payment arrangements since then and can we be assured that he is now paying his full share of income tax and national insurance? If not, when can we have that assurance? If his contract has been altered, has there been any cost to the taxpayer in doing so?
The Government committed to publishing details of all public servants paid more than £150,000, yet the chief executive of the Student Loans Company was not on the list published in 2011 despite, as we know, earning £182,000 and despite the fact that his predecessor was listed. Will the Chief Secretary explain why the chief executive’s name was not on that list and can he tell us if any other public servants paid more than £150,000 have not been listed so far and whether they will be listed in the 2012 publication?
Secondly, on the subject of the extent of the problem and the scope of the review, will the Chief Secretary confirm how many such deals were signed off since February, when the affairs of the chief executive of the Student Loans Company came to light? Will he confirm that those individuals paid more than the Prime Minister will have been personally approved by the Chief Secretary? How many has he personally approved? If any did not come to him for approval, can he explain why?
The review’s findings cover only people who earn more than £58,000, which is more than twice the average annual salary in this country. Will the Chief Secretary tell us why his review excluded anyone on less than £58,000 a year, and if he will return to the House with findings that include all such cases? In those cases where a public servant was not being paid on payroll, were the individuals concerned paying their proper share of income tax or national insurance? What was the cost to the Exchequer of those arrangements?
Despite the emphasis on transparency, the findings presented today do not include local authorities, non-maintained schools, public broadcasting authorities or other publicly owned companies. Those areas account for a substantial portion of the public sector pay bill. When will the Chief Secretary come to the House with figures that cover those areas? It is not enough for him merely to encourage the publication of that information by others.
The findings also do not cover publicly owned banks. I think that taxpayers who have paid to rescue those banks would expect those employed by the banks to be paying their tax at the appropriate rate. Will the Chief Secretary conduct a review of the extent of such arrangements in the publicly owned banks?
The findings also do not cover privatised or contracted-out services. Does the Chief Secretary think that those earning large incomes from taxpayer-funded contracts should be expected to pay their proper share of tax, and what steps will he take to ensure that that is happening?
Thirdly, as regards what the Government will do next, the Chief Secretary has told us that there will be a new presumption that the most senior staff must be on the payroll. How does he define “the most senior staff” for those purposes? Will he give a clearer definition of the exceptional circumstances in which he will allow some public servants to continue receiving their salaries off the public sector payroll? Will he give an undertaking that those cases for which those exceptions have been made will be made public and that the exceptional reasons for them will be given?
In future cases, will Departments be allowed to seek assurances about the tax affairs of public appointees with off-payroll arrangements, or will they be required to do so, as this morning’s news reports imply? If they will not be required to do so, why not? Why not have that duty to seek such assurances?
Where these arrangements are disallowed for current or future appointees, can the Chief Secretary give us his assurance that their salaries will not rise to compensate them for the loss of net income that may result? Can the Chief Secretary confirm that in accordance with previous commitments given on transparency and accountability, all those covered by the review whose earnings exceed £150,000 will be included in the Government’s annual list of people earning more than this figure?
On the wider issue that the Chief Secretary mentioned—how IR35 laws are used to avoid tax beyond the public sector, which clearly needs to be addressed—can he guarantee that HMRC will have sufficient resources to monitor, manage and enforce the full payment of taxes at a time when it is being asked to absorb £2 billion-worth of cuts to its budget?
In conclusion, the Government need to ensure value for money for every pound of taxpayer money spent, especially at a time of wage restraint for nurses, teachers and police, and huge cuts in the number of people working in the public sector, so the Opposition welcome the Chief Secretary’s commitment to rein in the avoidance of tax, but I hope this will apply to all those who are paid by the taxpayer, and that there will be genuine transparency in pay and in any exceptions to the rules set out today.
Danny Alexander
I am grateful for the shadow Chief Secretary’s welcome for the steps that I announced today, though it was striking that in her response there was no reference at all to the fact that many of these arrangements date back to the time of the previous Government. About 40% of the cases identified began work under the previous Government.
If the hon. Lady wants to know more about why those arrangements came into place, she could ask her Front-Bench colleagues if they were here. She could ask the Leader of the Opposition, for example, as two cases date back to his time as Secretary of State for Energy and Climate Change. She could ask the shadow Home Secretary, as nine cases date back to her time as Secretary of State for Work and Pensions. She could ask the shadow Health Secretary, as 45 cases date back to his time as Secretary of State for Health. She could ask her colleague the shadow Chancellor, because at least 24 cases date back to his time as Secretary of State for Education. Yes, it is once again their mess and we are cleaning it up.
The hon. Lady asked a few questions. With reference to the chief executive of the Student Loans Company, as I said in answer to the urgent question from the right hon. Member for Newcastle upon Tyne East (Mr Brown) in February, the individual concerned went on the payroll straight away—that day. I announced that at the time of that statement, which I think the hon. Lady responded to. Of course, going on the payroll was the appropriate thing to do. As I made clear then, I had no knowledge of any tax benefit to an individual. As is the practice with cases where those involved are earning more than the Prime Minister’s salary, the approval is given within the Department. My role as Chief Secretary is to examine the salary level to make sure that it is consistent with the pay restraint that we are properly putting in place across the public sector.
This review looked at the salary level above £58,200 because that is the minimum salary level in the senior civil service, and it focused on senior public service appointments. These rules will be available for Departments to apply more generally, should they wish to do so. As I said in my statement, the review was not looking for evidence of tax avoidance because individual tax arrangements are a matter of taxpayer confidentiality, but all the results of the review from across Government have been passed to Her Majesty’s Revenue and Customs so that they can investigate if they choose to do so.
I referred in my statement to organisations that are not within the control of central Government, such as local authorities, the BBC and so on, but I am sure the many Labour councils around the country will have heard the shadow Chief Secretary’s remarks and will be bringing forward as a matter of urgency transparent publication of all the arrangements in their local authorities. I look forward very much to seeing that.
In relation to IR35, I should remind the House that in the spending review we provided an additional £900 million to Her Majesty’s Revenue and Customs specifically to focus on their work tackling tax evasion and tax avoidance. That will include resources to investigate cases caught out by the review or cases under IR35. The hon. Lady will know that the Office of Tax Simplification looked at the operation of IR35 last year and we are carrying forward some of its recommendations, but the proposal on which we are launching a consultation today—that controlling persons in organisations should, as a matter of course, be on the payroll—will strengthen the IR35 regime, which I hope Members on both sides of the House will welcome.
Business and the Economy
Rachel Reeves Excerpts(12 years, 6 months ago)
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Rachel Reeves (Leeds West) (Lab)
This has been a valuable debate on Her Majesty’s Gracious Speech, with 44 speeches from the Back Benches, which reflects the concerns raised in all our constituencies about jobs, business and growth. We heard 26 speeches from the Opposition and 18 from Government Members. My hon. Friend the Member for Wansbeck (Ian Lavery) said about 20 minutes ago that at this stage in the evening it is difficult to say anything new, given that so many people have made the points already. We have heard several thoughtful and provoking interventions. We even had a song from my hon. Friend the Member for Blyth Valley (Mr Campbell), which livened up our afternoon.
Rachel Reeves
I am happy to take an intervention if my hon. Friend wants.
The Chief Secretary to the Treasury and the Government have serious questions to answer after this debate, because there remains concern about the stewardship of the economy. As my hon. Friends said, particularly my hon. Friends the Members for Bethnal Green and Bow (Rushanara Ali) and for Huddersfield (Mr Sheerman), my right hon. Friend the Member for Birkenhead (Mr Field) and my hon. Friend the Member for City of Durham (Roberta Blackman-Woods), there is a lack of vision, leadership and imagination in the Queen’s Speech on the economy and business. The hon. Member for Cleethorpes (Martin Vickers), too, said that the Government needed a new narrative.
The facts are undisputed. Our economy is in recession—the first double-dip in four decades—with unemployment rates too high and business investment too low, although to listen to some speeches from Government Members we would think that the economy was booming, with businesses spoilt for choice over whether to invest. In contrast, we have heard excellent speeches from Members on both sides of the House about the concerns raised by our constituents. We heard particularly powerful contributions from my hon. Friends the Members for Llanelli (Nia Griffith), for Houghton and Sunderland South (Bridget Phillipson), for Newcastle upon Tyne North (Catherine McKinnell) and for Edinburgh East (Sheila Gilmore)—on the human stories behind the raw statistics, sound and successful businesses shutting up shop because no one is buying, families facing rising bills, rents and mortgage payments while wages are not keeping pace, school leavers and university graduates losing hope as months on the dole turn into years.
However, the Government’s legislative programme seems utterly disconnected from those realities. There was no mention of the new jobs that we need, and nothing to turn round the crisis of more than 1 million young people being out of work. The modest measures that the Government have claimed will help struggling families and businesses are turning out, under examination, to be woefully inadequate to the task with which we are confronted. Perhaps it is because, as the Foreign Secretary said yesterday, the Government think that it is just not their responsibility and that the reasons for the recession are to be found not in their own failure, but in the fact that the rest of the country is just not working hard enough. That is a view backed up by the Business Secretary, who referred to the Foreign Secretary’s remarks as “commercial diplomacy”, and by the hon. Member for Salisbury (John Glen), who criticised businesses for their ill-advised criticism of Government policy. I am not surprised that the Foreign Secretary’s comments have been met with incredulity by small business owners, who are working every hour of the day to keep their books in balance.
Julian Smith
Does the shadow Minister welcome the £50 billion increase in exports in 2011 from the UK to international destinations?
Rachel Reeves
I am sure that businesses welcome the fact that sterling has depreciated, which has made it easier to export, but that is because of the Bank of England’s decision to cut interest rates, under the last Government, and quantitative easing, also under the last Government.
We have seen another example of how out of touch Government Members seem to be with the reality facing businesses, families and young people. School leavers and graduates are filling out dozens of job applications week after week—should they be working harder? Millions of people who would work extra hours if the work was available; families feeling more squeezed by the month, worried sick about how to make ends meet—is it their fault that we are back in recession? Should they be working harder?
Let us remind ourselves—for the Government seem to be in denial—that the backdrop to this debate is the first double-dip recession that the UK has experienced in 37 years, an outcome that the Government assured us would not happen. However, less than two years after boasting that the British economy was
“out of the danger zone”—[Official Report, 15 December 2010; Vol. 520, c. 901]
and was now a “safe haven” from the storms raging through the global economy, the Government have succeeded in steering us into a recession of their own making. They have tried to blame the instability of the eurozone, but I point them to the European Commission’s spring forecast, which says of the UK economy:
“The main cause of weakness in 2011 was household consumption, which contracted for four consecutive quarters…Investment, which had been expected to contribute positively to growth, actually fell by 0.6% in the final quarter of 2011 and by 1.2% over the year.”
Indeed, contrary to Government claims that storm winds from the continent blew their plan off course, the European Commission confirms that for the UK:
“Net exports were the main source of growth in 2011, contributing 1% to GDP growth.”
We should therefore be in no doubt and under no illusion: this is a recession made in Downing street.
With the eurozone now teetering on the brink of another downward spiral, the real worry is that we have yet to feel the full effect on the UK of the economic turbulence on the continent. The Business Secretary is right to warn that the worst may be yet to come, which makes it all the more serious a failure to have put the UK economy in such a weak position to withstand further deteriorations in financial market confidence and export demand. As my right hon. Friend the shadow Chancellor warned over a year ago, when a hurricane is brewing, we do not rip out the foundations of the house, but that is exactly what the Government have done, and the hurricane is now gathering force.
Let us look at what this recession means for jobs and business in our country. The latest jobs figures show that unemployment remains at a 17-year high. Youth unemployment is at more than 1 million—an issue raised in today’s debate by my hon. Friends the Members for Birmingham, Selly Oak (Steve McCabe) and for Birmingham, Erdington (Jack Dromey) and by my right hon. Friend the Member for Knowsley (Mr Howarth). The number of 18 to 24-year-olds claiming dole for more than six months has gone up by 115% over the past year. The number of those claiming for more than 12 months is up by 213%. In the Prime Minister’s latest desperate dissimulation, the austerity he is inflicting on the country is now called simple efficiency. However, I do not see anything efficient about presiding over rising youth unemployment, as my hon. Friend the Member for Walthamstow (Stella Creasy) also pointed out.
There is surely no greater waste than the waste of youth unemployment. It is a waste of talent and of life chances that will cost our economy and our Exchequer for decades to come, as the commission headed by my right hon. Friend the Member for South Shields (David Miliband) set out so lucidly in its report. There is no more egregious an example of Government mis-spending than the billions that they are spending on benefits—the cost of their own economic failure. They are now borrowing £150 billion more to cover rising benefit bills and the loss of tax revenues as businesses go out of business.
Rachel Reeves
I have already given way to the hon. Gentleman once this evening.
Meanwhile, caught between the pincers of a squeeze on lending and horrendous trading conditions, more and more businesses are going under. The Government cannot create jobs, but, as hon. Members on both sides of the House have said, they can and should do more to create the right environment for job creation. That is what has been so lacking in the Budget and in the Queen’s Speech.
Figures released by the Bank of England last month show that, in February, bank lending to companies fell by £4 billion—the sharpest drop for more than two years. Meanwhile, the Nationwide consumer confidence index fell by nine points last month. The inevitable result is that insolvencies are rising and rising. In the last three months, we saw 4,303 insolvencies in England and Wales alone—an increase of 4.3% on the same period a year ago, and the highest figure since 2009. The lack of policies for growth were highlighted today in thoughtful contributions from my right hon. Friend the Member for Sheffield, Brightside and Hillsborough (Mr Blunkett) and my hon. Friends the Members for Blyth Valley and for Wansbeck.
The businesses that are staying afloat are doing so by battening down the hatches. The latest industrial production numbers show a further decline, and we now know that construction output fell by 4.8% in the first quarter of this year, suggesting that the initial estimates of first quarter GDP, if anything, understated the extent of the economy’s contraction. But the truth is that, whether they are revised up a decimal point or two, or down, the statistics only confirm what we should already know from talking to families, businesses and young people in our constituencies.
Families and businesses desperately need the Government to get a grip and get us out of the deep hole that they have dug us into. Instead, we have a programme of Bills that lack any sense of urgency or, indeed, relevance to the reality of life for most people in this country right now. The Prime Minister and his Cabinet seem to be living in a parallel universe. Indeed, the only person whose employment prospects the Prime Minister seemed to care about was the head of News International. I can tell him that the million people who have lost their jobs since he came to power do not need a text message telling them to keep their heads up. They need a real plan for jobs and growth, and a Government working night and day to find ways to help them to get by and to get on in life.
This Government give the impression that there is nothing they can do, and that we should just resign ourselves to years of hardship while waiting for something to turn up, but the reality is that a Government who really cared could do so much more to make a difference to the lives of our constituents. Labour Members have made proposals that could help to turn our economy around, and that could help businesses struggling to break even and families struggling to make ends meet. Why will the Government not implement a national insurance holiday for small firms taking on extra workers, to help businesses struggling to survive and young people desperate to get into work? Why will they not bring forward investment in vital infrastructure projects, so that we could create new jobs in the construction sector at the same time as securing our future economic strength?
Why will the Government not reverse their damaging VAT rise? That would boost business and consumer confidence, and kick-start the growth that we need to get the deficit down. Why have they refused to repeat the tax on bank bonuses, so that money squandered on bonuses by banks that are not doing their bit to get our economy growing could be clawed back and put to better use, funding 100,000 jobs for young unemployed people and the construction of 25,000 new and affordable homes?
Why have the Government not taken the opportunity of this Queen’s Speech to announce legislation that could protect and improve the living standards of families feeling the squeeze—for example, by creating a more competitive energy market, with guaranteed low tariffs for 4 million people over the age of 75, by stopping train operators clobbering commuters with high fares, and by empowering consumers with new rights against rip-off surcharges by banks, airlines and pension providers? As my hon. Friends the Members for West Bromwich West (Mr Bailey) and for Stoke-on-Trent Central (Tristram Hunt) have said, why was there no Bill in the Queen’s Speech on higher education or on co-operatives? What do we get from this Government? Just the hope that something will turn up—a hope that their own inaction and inadequacy will spur the British people to greater efforts.
This is a legislative programme that falls well short of what is needed. We need investment flowing into energy-efficient infrastructure and green technologies. Instead, we get a green investment bank that has nothing to invest. We need action to bring responsibility and restraint to the boardroom, ending unjustifiable pay packages that reward failure, but the Government’s proposals fall far short of what is needed. While this Government state that the priorities of the Queen’s Speech are economic growth, deficit reduction and help for businesses, there is nothing to boost bank lending to small businesses, nothing to help hard-pressed families and nothing to turn around the tragic rise in youth unemployment.
In conclusion, we heard great claims for this legislative programme—a Queen’s Speech that was supposed to mark the re-launch of this coalition, a plan of action that the Prime Minster said was about supporting growth and business, and giving a helping hand to families and those he called the “strivers”. The reality is, however, that people are striving to find anything in this programme that lives up to the rhetoric. This is a Government whose idea of a growth strategy is giving a tax break to millionaires, while cutting tax credits for those working for modest wages.
Having choked off the recovery and taken our economy back into recession, the Government who first blamed the snow, then the royal wedding and the eurozone now seem to be blame everyone but themselves for not working harder. The truth is that it is this Government who need to work harder. It is time the Prime Minister started taking responsibility for the recession he has created. It is time the Prime Minister started taking responsibility for turning our economy around. Yet there is precious little in this legislative programme to suggest that the lessons have been learned, and precious little to stop the economy from sinking further into recession. There is no sign that the Government understand the scale of the task before them, and nothing to reassure the businesses and working people of this country that we have a Government who are up to the job that now confronts us.
Danny Alexander
I was about to come on to the mess that the Labour party made of our economy, but the right hon. Gentleman’s question causes me to bring those remarks forward. One of the most calamitous failures of the last Labour Government was the complete failure to regulate the financial sector and to control the excesses that built up in the banking system, and the figures he gave are just one example of that. The banking Bill will implement the reforms that are necessary to deal with some of the excesses and, more importantly, to protect the taxpayer and the British economy from the sorts of problems that previously arose. It was very striking that in neither Labour Front-Bench speech did we hear any apology for the previous Government’s failure to regulate the banks properly, just as we heard no apology for the mess they made of our public finances and the many other mistakes they made, too.
Danny Alexander
No. I have given way to the hon. Lady’s Front-Bench colleague three times, and I am now going to press on. I have only two minutes left, and she used up plenty of time.
There were a number of speeches about the groceries code adjudicator, including by the hon. Member for Macclesfield (David Rutley) and my hon. Friend the Member for St Ives (Andrew George), who played an important role in promoting the idea of the GCA and rightly welcomed the fact that the Government will take that forward. A number of comments were made, especially by Opposition Members but also from the Government Benches, on the enterprise and regulatory reform Bill. By and large, its measures on directors’ pay were welcomed, although concerns were expressed, particularly by Labour Members, about the proposals on employment law. The hon. Member for Bolton West (Julie Hilling) made that a key point in her speech, although I noticed that she welcomed the substance of the measures in the Bill, which are to do with providing more options before a tribunal is reached to enable complainants to resolve their case without the need to go through what she rightly describes as an often painful and expensive process. It is important that those measures are carried forward, and they will make a difference for many small businesses.
The economic context was an important theme in this debate, and Members on the Government Benches are fully aware that addressing the key issues is no easy task in the current economic climate, not least because of the crippling legacy the last Government left to us: a decade of unbalanced growth that left the UK one of the most indebted countries in the world; a decade that resulted in our having the most highly leveraged financial system of any major economy; and a decade that meant the UK entered the economic crisis with the highest structural deficit in the G7. All that meant that the UK was one of the hardest hit countries in the world when the crisis came.
Our recession was among the deepest and our deficit among the largest, which means that our challenge to deliver a sustainable recovery is among the greatest. Let me remind the House that when this Government came into office we inherited the largest peacetime Budget deficit this country has ever faced and the largest forecast deficit in the G20—larger than those of many of the countries mired in the sovereign debt storm in the euro area. It is only because of the decisive and immediate action we took that we have sheltered the UK from the worst of that debt storm.
The measures in the Queen’s Speech represent part of a bold and wide-ranging programme of economic reform: a strategy to rid the economy of the debt burden left by the previous Government; a strategy to secure our stability at a time of global instability; and a strategy that puts private sector enterprise, ambition and innovation at the heart of our recovery. It is the right recipe to clean up the mess that the Labour party left us and to bring this country back to sustainable prosperity.