Child Trust Funds
Sajid Javid Excerpts(11 years, 7 months ago)
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The Economic Secretary to the Treasury (Sajid Javid)
The Government have today launched a consultation on whether they should permit the transfer of savings held in child trust funds to junior ISAs, and, if so, on what basis. The Government propose that voluntary transfers from child trust funds to junior ISAs should be allowed if requested by the registered contact for an account, usually the parent or guardian.
The purpose of the consultation, which runs until 6 August, is to obtain further evidence on potential costs, benefits and other impacts of the Government’s proposal, as well as asking for opinions on any alternative proposals, before deciding whether to proceed with any changes.
I will deposit copies of the consultation document in the Libraries of both Houses.
Oral Answers to Questions
Sajid Javid Excerpts(11 years, 7 months ago)
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The Economic Secretary to the Treasury (Sajid Javid)
Those buying services on behalf of taxpayers should be continuously looking for ways to maximise value for communities. As part of the sustainable procurement agenda, the Department and its agency already consider social factors when evaluating relevant tenders. The Cabinet Office guidance on the Public Services (Social Value) Act has been shared with all procurement staff in the Department and its agencies.
Hazel Blears
I thank the Minister for that reply, but as economic growth and job creation are proving somewhat elusive for the Government, will he now take practical steps to include in major infrastructure contracts—such as High Speed 2, defence procurement and house building programmes—social value clauses that promote local labour, apprenticeships, local supply chains and small and medium-sized enterprises? That is a practical measure that he could put into action now.
Sajid Javid
First, I hope the right hon. Lady will join me in commending the work done by my hon. Friend the Member for Warwick and Leamington (Chris White) to ensure that the 2012 Act reached the statute book. I also commend her for her work to promote and help its passage. However, I do not recognise her comment that jobs and growth have been elusive. We have seen 1.25 million jobs created in the past three years: one of the fastest rates of private job creation ever. Returning to her main point, it is important that social impact is taken into account in public procurement. The Treasury takes that very seriously, and we expect other Departments to do so too.
Jesse Norman (Hereford and South Herefordshire) (Con)
Will my hon. Friend join me in congratulating Hereford Futures on its new construction project in Hereford, which precisely targets drawing in local labour and local firms for the reasons of social value that the right hon. Member for Salford and Eccles (Hazel Blears) mentioned?
Sajid Javid
Yes, I join my hon. Friend in commending Hereford Futures. It is just the kind of procurement we want in promoting social impact.
Helen Goodman (Bishop Auckland) (Lab)
Q6. What recent assessment he has made of the performance of the economy in the north-east; and if he will make a statement.
Karl MᶜCartney (Lincoln) (Con)
Q8. what steps he is taking to secure economic recovery.
The Economic Secretary to the Treasury (Sajid Javid)
The Government’s strategy of deficit reduction, monetary activism and supply-side reform is designed to protect the economy and to lay the foundations for stronger, more balanced growth. There are encouraging signs that the economy is healing. The deficit is down by a third, GDP is growing and the private sector is creating jobs at a near-record rate.
Karl MᶜCartney
I commend the Government’s efforts to reduce the budget deficit. The Opposition are yet again advocating more spending to achieve economic salvation, but such expenditure in the past has left us with a current national debt of close to £1.2 trillion. Does my hon. Friend agree that the British public, and certainly my constituents in Lincoln, will not trust the Labour party with the nation’s finances as long as it continues to hold on to such reckless ideas and to a shadow chancellor who continues to peddle them?
Sajid Javid
I could not have put it better myself; I agree 100 per cent. with my hon. Friend. The economy is healing after suffering the deepest post-war recession this country has seen, which destroyed the hopes of many working families up and down the country. The deficit is down by a third, which has brought confidence and helped create jobs at a record rate: 1.25 million created in three years.
Mr Speaker
Order. I do apologise to the hon. Lady, but we must press on. There is a lot to get through. We need short questions and brief answers.
Sajid Javid
In the last decade of the previous Government, youth unemployment rocketed by more than 70%, so the hon. Lady is in no position to lecture this Government on jobs. In three years, 1.25 million private sector jobs have been created, more people are now employed in the private sector than at any other time in our history and we had a faster rate of job growth last year than the rest of the G7.
George Freeman (Mid Norfolk) (Con)
I congratulate the Government on having created six private sector jobs for every public sector job loss. Has the Minister seen the latest news from the CBI, which this week shows trend growth for this year running at 1.8%, and has he seen this quote from the CBI’s director of economics:
“We continue to expect UK economic growth to strengthen and become more broad-based over this year and next”?
Sajid Javid
I have seen the report to which my hon. Friend refers. I have also seen similar reports—for example, from the National Institute of Economic and Social Research—which also show encouraging signs. Together, all those reports show that this Government’s policies are working.
Mr Russell Brown (Dumfries and Galloway) (Lab)
In reply to a question I tabled, which eventually ended up with the Cabinet Office, I was informed that between June 2010 and September 2012, 741,000 private sector jobs were created. Can the Minister explain the discrepancy between that figure and the fanciful figures of 1 million, and now 1.25 million, private sector jobs that he and his colleagues use?
Sajid Javid
The numbers I tend to look at are those provided by the Office for National Statistics. Those numbers show not that 1.25 million jobs were created in the private sector since the end of the first quarter of 2010, but that 1.31 million jobs were created. If we allowed for transfers from the further education sector, which we do not, the figure would be 1.5 million jobs.
Andrew Stunell (Hazel Grove) (LD)
Q9. What plans the Government have to use the UK’s presidency of the G8 to tackle corporate tax evasion.
Ian Austin (Dudley North) (Lab)
Q16. What recent assessment he has made of the extent to which the rate of increase of average earnings has kept up with the rate of consumer price inflation.
The Economic Secretary to the Treasury (Sajid Javid)
The best way to deal with today’s cost-of-living challenges is to have paid employment. In the UK, the number of people employed has risen by 2.1% compared to a year ago—a faster rate of growth than those of our major competitors, including the US, France, Germany, Japan and the euro area as a whole.
Ian Austin
Instead of being complacent, the Minister should look at what the Office for Budget Responsibility says, which is that real wages will be lower in 2015 than when this Government came to power. A survey in Dudley shows that nine out of 10 families do not think they will be better off next year than this year, that eight out of 10 spent less at Christmas, and that a similar number have stopped saving. Can the Minister tell me why his Government are cutting taxes for millionaires instead of helping hard-pressed families in places such as Dudley?
Sajid Javid
I think that the hon. Gentleman joined the House in 2005, and he is probably scarred by his experience during his first term in government, when he saw unemployment in his constituency rise substantially, with youth unemployment going up by more than 100%. He will know that paid work is the best way to raise earnings. As I said earlier, this Government have helped to create 1.25 million jobs over the last three years—more jobs in the private sector than at any other time in our history. He referred to tax cuts; the tax cuts that have come through the personal allowance are for the lowest paid.
Mike Freer (Finchley and Golders Green) (Con)
T1. If he will make a statement on his departmental responsibilities.
Damian Hinds (East Hampshire) (Con)
T4. In the light of the Government’s commitment to helping families to save for their futures, can the Minister tell us when we will see the details of the consultation on the measure announced in the Budget to allow the transfer of savings from child trust funds to junior individual savings accounts?
The Economic Secretary to the Treasury (Sajid Javid)
My hon. Friend has raised an important issue. The details of the consultation will be published today, and the consultation will close on 6 August. It will deal with the question of whether transfers should be allowed, and if so on what basis. The Government propose that voluntary transfers should be allowed if requested by the registered contact for an account.
Diana Johnson (Kingston upon Hull North) (Lab)
T8. On 25 June last year, the Secretary of State for Environment, Food and Rural Affairs told me that a new agreement was to be reached on flood insurance. I understand that the Chief Secretary, who has been heading up the negotiations, has blocked this deal. As the statement of principles is due to come to an end next month, can he tell me what assessment has been made of the effect on the housing market of hundreds of thousands of householders in this country not being able to get house insurance?
Sajid Javid
The hon. Lady raises an important issue; it is important that affordable insurance is available to people on whom flooding could have an impact. That is why this Government, led by DEFRA, are engaged in intensive negotiations with the Association of British Insurers. In Thursday’s DEFRA questions, she will have an opportunity to put this question to DEFRA Ministers.
Greg Mulholland (Leeds North West) (LD)
The latest dismal figures from the giant pub company Enterprise Inns show the disaster that the leased pub company model has been for the British economy. The boss paid himself nearly £1 million last year, while his tenants are struggling to make a living and are subsidised by the taxpayer, through tax credits, to the tune of millions of pounds. Will my hon. Friend conduct a Treasury study into just how many millions the taxpayer provides to subsidise this immoral business model?
Sajid Javid
My hon. Friend cares deeply and passionately about the pub industry, and has done great work to help, including welcoming this Government’s decision to cut beer duty for the first time in decades. He makes an important point. He will know that Ministers in the Department for Business, Innovation and Skills are looking at this issue, and I will bring it further to their attention.
Mark Lazarowicz (Edinburgh North and Leith) (Lab/Co-op)
T9. The Chief Secretary was absolutely right on the question of the EU referendum Bill. He cannot speak for the Conservative party, but will he ensure that his party leader once again exercises his European veto and ensures that any such Bill does not come forward as a Government Bill and does not have Government backing?
Equitable Life Payment Scheme
Sajid Javid Excerpts(11 years, 7 months ago)
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The Economic Secretary to the Treasury (Sajid Javid)
As of 30 April 2013 the scheme has made payments totalling £604 million and has informed 85% of eligible individual policyholders the value of any payment due. The scheme has also published a further progress report, which can be found at:
http://equitablelifepaymentscheme.independent.gov.uk/
The scheme has now contacted all the eligible individual policyholders it can trace. Any holders of an individual non with-profits annuity or with-profits annuity who have not been contacted by the scheme should call the scheme on 0300 0200 150 to confirm the eligibility of their policy and be advised of the next steps they should take.
The scheme has also started making payments to those who bought their Equitable Life policy through a company pension scheme, with circa 65,000 payments already made to this group. These payments will continue over the coming months.
The scheme has also confirmed that the estates of some 8,000 deceased policyholders have been paid and the process of identifying, tracing and contacting the estates of deceased policyholders continues.
The Government are committed to drawing a line under the Equitable Life issue and the scheme remains on track to close as planned in 2014. The scheme will begin the process of closing down and shutting to new claims later this year. In advance of that the scheme will place adverts in national newspapers to encourage those that are due a payment and have not received it to come forward.
Banks and Banking
Sajid Javid Excerpts(11 years, 8 months ago)
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The Economic Secretary to the Treasury (Sajid Javid)
I beg to move,
That the draft Cash Ratio Deposits (Value Bands and Ratios) Order 2013, which was laid before this House on 26 March, be approved.
The draft order makes changes to the cash ratio deposits scheme, which is how the Bank of England funds its monetary policy and financial stability functions, which in turn benefit sterling deposit takers. Under the Bank of England Act 1998, banks and building societies of a certain size are required to place a proportion of their eligible deposits in a non-interest-bearing account in the Bank of England, which then invests these deposits in interest-bearing assets—specifically gilts—and the return it makes funds its monetary policy and financial stability functions, which benefit the whole of the banking sector, as well as the wider public.
The Government continue to believe that the cash ratio deposit scheme is the right way to fund the Bank’s important policy work. The operation of the scheme means that the Bank’s income is subject to two drivers: first, the gilt rate, and secondly the size of deposits eligible for the scheme, which is largely driven by the performance of the banking sector as a whole. Over the last five-year period, both these drivers have been lower than expected, which has caused a shortfall in the Bank’s funding. The Government are seeking to address this shortfall by recalibrating the parameters of the cash ratio deposit scheme to current economic conditions.More specifically, the order increases the proportion of deposits that eligible financial institutions are required to deposit at the Bank from 0.11% to 0.18% and increases the total amount of deposits that they have to hold to be eligible for the scheme from £500 million to £600 million. Alongside the Bank’s efficiency savings, these changes aim to ensure that its income covers the costs of its policy functions over the next five-year period.
The Bank is also playing its own part. It is committed to bearing down on costs. In particular, it will seek efficiency savings by establishing a shared corporate services model with the Prudential Regulation Authority. The Bank’s budget for the next five-year period takes these savings into account. The Bank also has opportunities to make further efficiency savings. These potential savings have not yet been incorporated into the Bank’s budget, so are likely to reduce the Bank’s running costs even further over the next five-year period. The Treasury will review the Bank’s progress in achieving these savings once the shared corporate services model with the PRA has been established. As part of the review, the Treasury will consider whether there are implications for the Bank’s funding requirements, and in turn for the cash ratio scheme.
Alongside that, and to ensure that the Bank’s important monetary policy and financial stability work continue to be fully funded, the Government have consulted on the changes to the parameters of the cash ratio scheme. It is these changes that are before us today. They are expected to increase the Bank’s income over the next five years to ensure that it is more closely aligned to the Bank’s costs. The amount that most institutions are required to deposit at the Bank under the scheme is small. In December 2012, 86% of deposits were made by just 20 institutions, with eight each contributing more than £50 million. The large majority of contributions are clearly from larger banks and building societies. Under the new parameters, some financial institutions will need to hold higher deposits with the Bank, but again it will be the larger banks and building societies that are most affected. In fact, 14 smaller institutions—mostly building societies—will be removed from the scheme altogether.
The Bank of England Act 1998 sets out that the cash ratio deposit rate can be changed only once every six months. The deadline for changing the rate for the next six months is 3 June 2013. If the agreement is not implemented by this date, the shortfall in the Bank of England’s funding will continue, which will be a further detriment to the dividend that the Bank pays to the Exchequer. The change is a sensible one that ensures that the Bank’s important monetary and financial stability functions are fully funded. The Bank of England is playing its part by making efficiencies in its operating costs, and this change ensures that banks and building societies that benefit from the Bank’s policy functions play their part. For that reason, I commend the measure to the House.
Sajid Javid
I thank the hon. Gentleman for his support for the order. He asked some good questions, which I will attempt to answer.
First, he referred to the use of the increased revenue by the Bank of England and to increasing costs of the Bank. There are three main points. First, the Bank is playing its part in making efficiencies by sharing corporate services with the Prudential Regulation Authority, which is a demonstration that the Government expect the Bank not just to ask for more revenue to cover its costs but to try to find better ways of generating value for money.
Secondly, in real terms—even after this change—the budget of the Bank of England will be around the same as what it was in 2000-01, so it has not seen a large increase in spending when compared with many Government Departments. The Bank is taking on new responsibilities and its functions have changed over the last decade or so. It is trying to accomplish all that with a budget, through the cash deposit ratio scheme, similar in real terms to what it was in 2000-01.
Thirdly, as the hon. Gentleman recognised, the Bank of England’s responsibilities have changed, especially since the financial crisis. The Bank has had to run numerous schemes and to do a lot more work in terms of financial stability, including new schemes such as the funding for lending scheme and others. I hope that he recognises—I think he does—that the Bank of England needs to cover the costs of these additional schemes.
In terms of the deposits that are affected, we estimate—this is an estimate from December 2012; the estimates will be updated, and I hope the hon. Gentleman appreciates that it is not easy to have the exact number—that about 86% of all sterling deposits in the UK are eligible. That is made up of about 20 institutions, eight of which contribute more than £50 million; the largest banks, naturally, make the biggest contribution.
The hon. Gentleman talked about some institutions being exempt; it was not quite that. As we have raised the bar—the eligibility requirement in the order—from £500 million to £600 million, some smaller deposit-making institutions will now be excluded from the scheme. Rather than being exempt, they are, technically, excluded from the scheme if their deposits are less than £600 million. My understanding is that almost all those 14 smaller institutions are smaller local building societies, which I think is welcome, as it reduces a cost—albeit a small one —for smaller institutions that support local communities.
The hon. Gentleman asked whether we had made any assessment of the economic impact. The Treasury has not done so specifically, because even once the change is taken into account, our view is that there would be a negligible impact as the Bank will not receive a significant increase in revenue from these operations. As he will know, many of the banks concerned would in any case have deposits with the Bank of England beyond the scheme, as part of their capital reserves, so there is no reason to think that the change would make a big difference to their reserve management programmes or would therefore necessarily have an impact on their lending programmes.
With that, I hope I have satisfactorily responded to the hon. Gentleman’s questions, and I again welcome his support for the order.
Question put and agreed to.
Public Service Pensions Bill
Sajid Javid Excerpts(11 years, 8 months ago)
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The Economic Secretary to the Treasury (Sajid Javid)
I beg to move,
That this House disagrees with the Lords in their Amendment 78B but proposes amendment (a) to the Bill in lieu of that amendment.
I begin by thanking Opposition Members for their constructive engagement on the treatment of Ministry of Defence police and fire workers’ normal pension age under the Bill. Important issues were explored during our debate on Monday, when views were put forward passionately by Members on both sides of the House. The Government have acknowledged the strength of feeling. In the other place, my colleague Lord Newby has explained that the Government fully accept the spirit of the Lords amendment we are considering today.
We are willing to include a review of defence fire and rescue service and MOD police members’ NPA in the Bill and formalise the approach that I announced we were intending to take. The review will ensure that the issue can be discussed formally by the appropriate parties to consider the best way forward. However, although the Government agree with the amendment, it requires some small changes to ensure that it works as intended. I urge hon. Members to agree to the tweaks put forward in our amendment.
I will explain briefly why the wording of the Government’s amendment differs slightly from that proposed in the other place. First, we have made a small change to the nature of what must be reported on in order to make it more precise and legally certain. Secondly, the names of the work forces were incorrect. The reference to the “Defence Fire and Rescue Service” has been adjusted to make it consistent with the terms of other legislation that describes the same work force.
Thirdly, the amendment passed to us from the other place seems to confer a double role on the Secretary of State for Defence, as he would be included by both references. My right hon. Friend is a very busy man. It cannot be right to require him both to prepare and to lay a report in conjunction with himself—that would defy the laws of physics. I assume that was unintentional, and it is easily rectified by Government amendment (a).
Finally, and most importantly, it is unclear when the amendment is to come into force. The Opposition in the other place have called for the review to be completed within six months. I am keen to address the House on that point, because I believe that there has been some confusion about whether that means six months from the date of Royal Assent, or six months after section 9 comes into effect. The Opposition’s amendment would require a review within six months of the Act coming into force. However, the Act will be brought into force in stages and some sections might not be commenced for more than a year. We do not intend section 9 to be one of those stages.
The Government’s amendment proposes that the review period should be six months from when clause 9, which relates to the state pension age link, comes into force. That provision alters the normal pension ages for those work forces, so that is where the focus should be. It is our intention that the clause should be commenced as early as possible. Standard Government rules require that provisions in a Bill are not commenced until two months after Royal Assent unless the Bill itself provides for earlier commencement, as the hon. Member for Nottingham East (Chris Leslie) will be aware from his time in government.
We should all remember that the key effect of the review is likely to be felt in 2015, which is when the new schemes are brought in, but the important point is that there will be no delay. The Government have every incentive to resolve the terms and conditions of the MOD police and the defence fire and rescue service as soon as possible, since they will be needed to design and implement the new scheme, which will cater for them in time for April 2015.
Sir Bob Russell (Colchester) (LD)
The Minister will recall that on Monday I was very critical of the absence of the Ministry of Defence from the debate. Has there been any involvement with it in the past 48 hours?
Sajid Javid
Yes, absolutely. It is of course a full Government position; it represents the views of not only the Treasury, but the MOD. In fact, I discussed the matter only yesterday with the Secretary of State for Defence.
Dr Eilidh Whiteford (Banff and Buchan) (SNP)
I congratulate the Minister on seeing sense and reaching an accommodation with the Lords on the amendment. Can he assure me that he will continue to work with the representatives of the MOD police and firefighters to ensure that the work force representations are brought into the process?
Sajid Javid
I am not used to getting warm words from the hon. Lady, and when I do I take them with good grace. I thank her for her warm welcome. I can assure her that when the MOD commences the review—it has already begun the preliminary work on it—it will include all stakeholders, and that of course includes the representatives of the two work forces in question.
The clock is already ticking and a delay would make implementation of the schemes all the more challenging. Moreover, I should emphasise that the time scale is already much tighter than that which Members requested during our debate on Monday. My colleague Lord Newby stated yesterday that the Government would not kick the review into the long grass. I reiterate that statement today and fully endorse his comments. I give the House my assurance that the MOD and the Treasury will work to ensure not only that clause 9 and the new clause set out in our amendment are commenced as soon as possible, but that preliminary work on the review will start before the new clause is commenced. I hope that hon. Members will agree that rejecting the amendment passed to us for consideration from the Lords and replacing it with the Government’s slightly more refined version is the most sensible way forward.
Mr Alan Reid (Argyll and Bute) (LD)
I am pleased that the Government have agreed to make this amendment. My constituents who work as police officers and firefighters at Faslane and Coulport will be pleased that the Government have listened to their case and tabled this amendment.
The report will look at the impact of the Bill on the health and well-being of defence police and firefighters, and at the ability of those over 60 to meet the strict fitness requirements that are necessary for the important and dangerous job that they do. The report will also consider the consequences of early retirement for the workers who are forced to retire early on health grounds because they cannot meet the stringent fitness requirements in their 60s, as well as the cost to the taxpayer.
The Government inherited this anomaly and it was missed by Lord Hutton in preparing his report. The Government have been faithful to the Hutton report in the Bill. I am pleased that they have listened to the concerns of defence police and firefighters, and have agreed to table this amendment.
After Monday’s debate, defence police and firefighters in my constituency expressed concerns to me about the size of the abatement of their pay that it was suggested might be necessary to reduce their retirement age to 60. I hope that all the calculations on the abatement of pay will be transparent in the report. Calculating pension contributions is an enormously complex process. Following a review by the Government Actuary’s Department, the abatement on pay rates for MOD firefighters has been reduced retrospectively from 9% to 7.8% from 1 April last year. The fact that that calculation has been made only recently and has been backdated is an indication of how complicated a subject this is. It is important that during the review, all the calculations are transparent and independently verified, and that the workers are allowed to ask questions about them.
I am delighted that the Government have listened and brought forward the review. I am fairly confident that the review will find that it is not good for the workers or for the taxpayer for people doing these strenuous and dangerous jobs to work beyond 60. The calculations will show that if the retirement age is 65 or 68 and significant numbers of people are forced to retire early on health grounds, both the taxpayer and the worker will lose out. The worker will lose out because they will not get the full pension that they had expected. The taxpayer will lose out because the amount that has been paid into the pension pot will not cover the cost of the pension if it is paid out early.
It would not be right for these workers to work beyond 60. The right comparison is with civilian firefighters and police who work for local authority fire services or other police forces. I am fairly confident that the review will recommend a retirement age of 60. I congratulate the Government on listening to the legitimate concerns that have been put forward.
Sajid Javid
I thank all hon. Members who spoke in the debate on Monday and who have spoken to me outside the Chamber. In particular, I thank my right hon. Friend the Member for Bermondsey and Old Southwark (Simon Hughes) and my hon. Friends the Members for Colchester (Sir Bob Russell) and for Argyll and Bute (Mr Reid) who have spoken today. I also want to put it on the record that my right hon. Friend the Member for East Yorkshire (Mr Knight) has made representations on behalf of his constituents on this important issue. He has been robust in representing them, even though as a member of the Whips Office he is not able to speak on their behalf in the Chamber, and that is reflected in the Government’s amendment.
UK Guarantee Scheme
Sajid Javid Excerpts(11 years, 8 months ago)
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The Economic Secretary to the Treasury (Sajid Javid)
UK Guarantees was announced in July 2012 with enabling legislation, the Infrastructure (Financial Assistance) Act 2012, receiving Royal Assent on 31 October 2012.
The Government are confirming that they have approved a guarantee for up to £75 million to Drax Finance Ltd for the partial conversion of a coal-fired power station to biomass.
UK Guarantees was launched in response to constraints in the long-term debt markets by providing a sovereign-backed guarantee to help infrastructure projects raise debt finance. In exchange for a guarantee a fee will be charged to the borrower, determined by the nature of the guarantee and the risks inherent in the project. Guarantees for up to £40 billion in aggregate can be offered under the initiative.
The Government will report to Parliament on the financial assistance given in line with the requirements set out in the Infrastructure (Financial Assistance) Act 2012.
Cash Ratio Deposit Scheme
Sajid Javid Excerpts(11 years, 8 months ago)
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The Economic Secretary to the Treasury (Sajid Javid)
The Treasury has today published a summary of consultation responses in relation to the review of the cash ratio deposit scheme, copies of which are available on the HMT website and have been deposited in the Libraries of both Houses.
Public Service Pensions Bill
Sajid Javid Excerpts(11 years, 8 months ago)
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The Economic Secretary to the Treasury (Sajid Javid)
I beg to move, That this House disagrees with Lords amendment 78.
Mr Speaker
With this it will be convenient to discuss the following:
Lords amendment 79, and Government motion to disagree.
Sajid Javid
We return today to the Public Service Pensions Bill, which will put public service pensions on a fair and sustainable footing for generations to come. There was broad support from all parts of the House for this measure, and I am grateful to all those who have voiced an interest in the Bill for their co-operative approach. I would also like to draw the attention of the House to the progress the Bill has made in the other place.
First, when the Bill left this House, the Opposition were concerned about the wide scope of powers to make retrospective changes and to amend primary legislation. The Government understand that concern. Pensions are an important part of scheme members’ future income in retirement. We therefore tabled amendments in the other place to give members or their representatives a complete veto over any significant adverse retrospective change to their pensions and to restrict the powers to amend primary legislation. Furthermore, any Treasury orders for negative revaluation of scheme benefits will now need to be made by the affirmative Commons procedure.
Secondly, the Opposition sought further assurances on the governance elements of the legislation, particularly a requirement in the Bill for employee representatives on scheme boards. Again, I am pleased to report that the Government tabled amendments in the other place to require an equal balance of member and employer representatives, along with an explicit requirement for national scheme advisory boards.
Richard Fuller (Bedford) (Con)
My hon. Friend is talking about some welcome changes that the Government have made, but there is another party to this contract on pensions. The taxpayer will foot the bill for the unfunded part of the obligations of public sector pensions. Will he assure me—
Mr Speaker
Order. Will the hon. Gentleman resume his seat? I do not blame him, in the first instance, because the trouble, the mischief, was started, however inadvertently, by the Minister, who is looking at me with an innocent expression belied by the reality of what he was saying in the debate. This is not a generalised debate; these are narrowly defined matters, and we are considering the relevant amendment, to which, to put it kindly, the hon. Gentleman’s remarks were not altogether adjacent.
Sajid Javid
With your guidance, Mr Speaker, which I always take very seriously, I will move directly to Lords amendments 78 and 79.
The Lords amendments would give the civil servants in the MOD fire and police services a normal pension age of 60 in the new schemes. The Government do not believe that this is the correct way forward.
Sir Bob Russell (Colchester) (LD)
Is the Minister seriously stating that an MOD police or fire officer should be treated differently from a police or fire officer not employed by the MOD?
Sajid Javid
As I make progress and explain the Government’s position, I will come to that point.
The Government do not believe the amendments to be the correct way forward, either for the taxpayer or the forces themselves. I will briefly set out some of the key reasons for our position. Allow me first, however, to reassure both hon. Members and the work forces themselves that the Government understand their concerns. We have listened to the representations and reflected on the discussions in another place, and I want to make it absolutely clear that we recognise the unique position of these work forces and the important role that the defence fire and rescue service and the Ministry of Defence police play.
My colleague Lord Newby met DFRS and MDP officers to talk through their experiences on the ground and the demands of their roles. There is no doubt that these public services deliver a valuable service to the armed forces and the country more generally. The nature of the work they are called on to deliver is often very difficult and at times can be dangerous. On occasion, some members of these work forces might find themselves putting their lives at risk. No one in the House is suggesting otherwise, so let us not be distracted from this important discussion by cherry-picking anecdotes and citing emotive examples of the work involved, because that is not the issue being discussed today.
Simon Hughes (Bermondsey and Old Southwark) (LD)
Like many people, I have met representatives of workers in the MOD scheme, and they have referred me to Lord Hutton’s comments that he was not aware of the anomaly and therefore did not address it in his report, but that he was sympathetic. I have seen both sides of the argument. Our noble friend Lord Newby said that he would reflect on the debate in the Lords. Have there been any further conversations with Lord Hutton? In general, my understanding is that the Government are seeking to implement Lord Hutton’s recommendations, but this issue has clearly slipped through the net.
Sajid Javid
My right hon. Friend is right to raise Lord Hutton’s contribution to these pension reforms. He has done an excellent job overall, which the Government, including me, have put on record a number of times, although I am happy to do so again today. As my right hon. Friend says, Lord Hutton made clear his views on this issue in the debate in the other place. Since then Lord Newby has engaged with a number of stakeholders. I will provide a further update on that as I progress.
Ian Paisley (North Antrim) (DUP)
Lord Newby said in the House of Lords debate that these amendments would
“fundamentally alter the status of these individuals and that should not be carried out lightly.”—[Official Report, House of Lords, 12 February 2013; Vol. 571, c. 743.]
How does the Minister respond to those points and will he say what those alterations would be?
Sajid Javid
I thank the hon. Gentleman for his intervention. I agree that the general pension reforms in this Bill should not be carried out lightly. As I progress and we have this debate, I hope he will be reassured that the Government have taken this issue seriously and will set out their case carefully.
The issue at hand is the appropriate treatment of those work forces’ pensions. The amendments would actively reduce the normal pension age for individuals joining them. It would not be a minor reduction, but a reduction of five years from the pension age put in place for those work forces by the Labour Government in 2007. It would also be a reduction of seven years from the pension age that they would otherwise see when the new scheme comes into force in 2015. That approach would run counter to the need to control the risks associated with increased longevity, which all parties agree must be addressed. I believe that all parties in this House support the aim of controlling those risks. The amendments would make those work forces unique in the public sector, with their pension age falling at a time when everyone else’s is rising.
In response to the issue being highlighted, the Government have taken measured and appropriate action. Rather than making a knee-jerk response to fit with the legislative time scale of the Public Service Pensions Bill, the Ministry of Defence has written to the forces. Its letter states that the MOD is willing to consider how the current pension age of 65 might be maintained for those individuals when the new pension schemes are introduced in 2015. I believe that is a reasonable offer by the Government, and we will of course stand by it. It is our duty as parliamentarians to look at the whole picture. Pensions are only one part of the remuneration and employment package of those work forces.
Sir Bob Russell
The Minister is saying that the retirement age of a current Ministry of Defence police officer would remain at 65. So that I can better understand, what would the retirement age for a constable in the Essex police be?
Sajid Javid
To be clear, what I have said is that the Ministry of Defence is willing to consider keeping the age at 65. It has not yet made that decision, which would require further engagement, although it has set out how it intends to engage. As I think my hon. Friend knows, under these proposals the answer to his question about a police officer would be 60, as opposed to 65 for civil servant pension schemes.
Chris Leslie (Nottingham East) (Lab/Co-op)
When the Minister complains that agreeing to these Lords amendments would create a unique circumstance, is he not really admitting that the unique characteristic of this particular class of MOD firefighter and MOD police officer is that they are the outliers? They are the only ones who will have to work all those extra years, whereas other police officers and firefighters in comparable roles will retire at 60. That is essentially what he is saying.
Sajid Javid
During the Bill’s passage through Parliament, the Opposition spokesman has raised mostly constructive issues and, as we shall see during this debate, the Government have accepted many of them. This is one issue, however, on which he and his party have little credibility. He says that the current retirement age for MOD police and fire service workers is higher than that of their civilian counterparts, but that situation was created by the Government whom he supported, so he really does not have much credibility on the issue.
Sajid Javid
I will give way to the hon. Gentleman again. Perhaps he will now tell me whether the previous Government considered these issues when they changed the retirement age from 60 to 65 for MOD fire service workers and policemen.
Chris Leslie
I was not part of the Government at that time, but the key point is that, as he knows and as we have heard throughout the debates that have been quoted in interventions today, even Lord Hutton did not spot this anomaly. Lord Hutton says that, if he had known about it, he would of course have corrected it and aligned the MOD firefighters with all the other firefighters. I am prepared to say that the last Government overlooked this issue; it was an error. It was a mistake, and we should be big enough to admit that. Is the Minister now big enough to throw away his Treasury brief, which simply tells him to resist all changes, and to act for himself and do the right thing by treating all firefighters the same?
Sajid Javid
I am very comfortable that the Government are doing the right thing by resisting the amendments. As the debate progresses, I hope that more hon. Members will be persuaded that we have taken the right approach to this complex issue. I shall explain further as the debate progresses.
John McDonnell (Hayes and Harlington) (Lab)
Will the Minister explain the nature of the offer? I just want to know what the process will involve, following consultation. Will it require primary legislation, or will it be dealt with through delegated legislation? How will it be implemented? What sort of time scale is he considering?
Sajid Javid
The hon. Gentleman is asking those questions for all the right reasons. I still have a few more minutes in which to set out the Government’s case, and I hope that I shall answer them in the process. If anything remains unclear, however, I hope that he will come back to me. I will be happy to add to the information that I am giving the House.
Richard Fuller
Labour has accepted that it completely forgot about those workers when it was in government. Its spokesman has been noble enough to admit that it did not find the 350 people in the fire service and 3,000 people in the military police. Given that my hon. Friend the Minister now understands that fact, can he tell me why the workers did not bring the issue to the attention of the then Government? Were the unions involved in any negotiations at the time, or has this just become an issue now?
Sajid Javid
My hon. Friend raises a good point. I cannot answer on behalf of the previous Government, but I can say that the change was carried out by ministerial order. There was no open, ongoing debate on the matter like the one we are having today. A written ministerial statement was issued by the then Minister for the East Midlands, Gillian Merron, on 26 July 2007, and I can find no record of any Labour MP complaining about the change at that time. If my hon. Friend is making the point that the Opposition’s credibility is severely damaged because of this, he is making it very well.
Sir Bob Russell
It was not connected to the pensions issue, but I raised with Labour Ministers at the time the stupidity of cutting the size of the MOD police, whose numbers in my constituency have been reduced from 33 to one.
Sajid Javid
We all know that my hon. Friend is an assiduous Member of Parliament, and that he reviews all legislation carefully. I thank him for making that point. He will no doubt have looked at these matters closely at the time, and I welcome his looking at the legislation today.
Ian Paisley
The party political spat is incredibly interesting to observers—and the employees are the people who count most here. Will the Minister set out for me—he has been able to travel some way in his contributions to date—where the terms and conditions of employment set for Ministry of Defence personnel are materially and significantly different from those of ordinary Home Office fire services and police officers across the rest of the UK? If he set that out clearly, it might help me to come over to his side on this issue.
Sajid Javid
The hon. Gentleman may already know that MOD fire workers and police are classed as part of the civil service and, as such, are part of the principal civil service pension scheme. That is why the changes I referred to, which were made by the then Government back in 2007, affected those employees. As I plough on through my speech, I hope I will be able to answer some of his concerns.
Ian Paisley
I thank the Minister for his generosity in giving way again. It is the material condition of their work that counts. What is significantly different between an officer who dons a hat with an MOD badge putting out a fire and one who does so but dons a hat with his regional service cap? I simply do not get it, and I think that many Members do not get it either, while those who do not get it the most are the fire service men.
Sajid Javid
Clearly, there is some difference in the roles they carry out, but I readily accept that the physical attributes required and the difficulty of the job are similar in each case. That is why I said at the outset that there is no point in trying to debate the difficulties, for example, of one job in the civil fire service in comparison with those in the MOD fire service, but significant differences have developed over time between the pay and conditions, including the pensions, of the civil and the MOD work forces. The hon. Gentleman will see, as I have outlined, that the MOD has committed to consider the issue. My main point is that this Bill deals with approximately 12 million employees and their pensions in the public sector, and that this is not the right occasion for looking at individual terms and conditions in each scheme for each particular work force. There is a time and a place for that—but it is not the debate on this Bill. I do not believe that it is the job of Members here or in the other place to look at the individual terms of each scheme. Rather, we should ensure that the Bill we pass has sufficient flexibilities to ensure that if the NPAs—normal pension ages—or other terms and conditions in the pensions for particular work forces need to be changed at some point in the future, that can be accommodated.
Alison Seabeck (Plymouth, Moor View) (Lab)
Will the Minister tell us how many meetings he has had with Defence Ministers to discuss the implications for the MOD and how many he has held with the MOD police and fire service trade unions?
Sajid Javid
I can tell the hon. Lady that I am not the only Minister in the Treasury working on this issue, as there is a whole team of Ministers, including my noble Friend Lord Newby. Treasury Ministers have had meetings with representatives of the respective work forces and other stakeholders. I would like to plough on—
Sajid Javid
I promise that I will in a few moments.
It is our duty as parliamentarians to look at the whole picture of pensions, which are only one part of the remuneration and employment packages for these particular work forces. We should not simplify the issue by making stark comparisons out of context. Simply comparing these forces to their local authority counterparts achieves no useful purpose beyond critical grandstanding. Differences between these forces’ terms of employment are of long standing. If these issues are to be reopened, they should be considered in the round, with proper consultation between employer and employees.
As well as having different retirement ages from local authority, fire and police personnel, the MOD employees have different contribution rates and levels of pay. Unlike their local authority counterparts, they also have access to benefits such as the civil service compensation scheme. To pluck out their pensions from the wider package would be short-sighted, and potentially damaging to the efforts of both employers and employees to get the package right.
Mr Anderson
I thank the Minister for giving way. He is being very generous.
We are not just legislating on people’s terms and conditions, and it is important for us not to legislate and get it wrong. What about people’s capability to do the job? Are people over 60 expected to go into a burning building in the same way as they did when they were 26? John Hutton clearly does not think that they should do so if they work for a local authority, and the same should apply in this context. We should think not only about the person who is running into the building, but about the person who is inside waiting for him. That is why the Minister should change his mind.
Sajid Javid
The hon. Gentleman has made a good point, and made it well. It is important to consider the capability of each work force, especially in view of increased longevity, and to ensure that the retirement age is appropriate. That is what I expect the MOD to do, and that is what it is doing, but it should do it in the context of the particular scheme for each work force, rather than by becoming involved in the details of each work force that are affected by the broad changes introduced by the Bill.
We have a responsibility to look rationally at the costs of the proposed changes. The additional costs may appear small in comparison with the savings that the Government are making through their overall programme of pension reforms, but the Government consider them to be both unnecessary and significant. They are unnecessary because those concerned will continue to have access to the civil service pension scheme, which is an excellent scheme that many in the private sector, including those doing the most arduous or specialist work, would envy. They are significant because some early indications suggest that they could be as high as £10 million a year for the lifetime of the schemes. This expenditure would take money away from front-line servicemen and women, and from other important defence priorities.
Those who support the amendments may believe that the members should pay the cost of the reduced retirement age themselves. That would imply increased employee contributions and a potential average take-home pay cut of over 8%—although it would depend on the exact terms—which might not necessarily be welcomed by members of the forces.
As politicians, we should not be trying to set the fine detail of public servants' pension schemes on the Floor of the House. Rushing at it might lead to mistakes. As I hope I have made clear, I acknowledge that the issue deserves further consideration allowing time for discussions between employer and employee. We owe it to the DFRS and the MDP to get this right.
Simon Hughes
What the Minister has just said is very helpful, provided that the Treasury too will be helpful if the negotiations between the unions and the MOD produce a different package. I understand the financial point, and I also understand that this is not just about retirement ages but about all the other benefits, which may be better than they are under the present arrangement. Can the Minister confirm that, if the MOD picks up the baton, the Treasury will not walk away and say “Nothing to do with us, guv”, but will continue to take an interest in the resolution of this outstanding bit of business?
Sajid Javid
What I can confirm is that the Treasury and the MOD are in exactly the same place. The MOD agrees with the terms that I am presenting today, and, as I have said, has made it clear that it will think about the issue. It has already written about it to members of the forces, as I would expect it to do in its capacity as the employer of these vital groups of workers.
The Government have not dismissed the claims of the DFRS or the MDP; far from it. The MOD has acknowledged in writing that there is a case for looking at their pension age to check that it is still appropriate.
Finally, there is a technical reason why the Government cannot accept these amendments as they currently stand. They would—unintentionally, I assume—confer powers on the Scottish Parliament and Welsh Assembly to make schemes for these civil servants. That would give new functions to devolved Administrations, without any proper consultation or consideration of whether that is the appropriate framework for managing the interests of these specialised work forces.
In summary, this is a complicated and inevitably emotive issue, and one that we have discussed at some length. I am sure I will not have persuaded all Members present today.
Mr Anderson
The Minister has made two clear points: this issue has not been resolved and needs to be resolved; and there is an issue to do with the Welsh and Scottish Parliaments. Therefore, is not the genuine thing to do to withdraw the Bill today, until those points can be put right?
Sajid Javid
I have to disagree. Of course that is not the right thing to do. This Bill is about 12 million workers in the public sector and their pensions, and about the settlement between those employees, their employers and the taxpayer, and it is vital that we make this reform so we can get the public finances on a sounder footing. I think the hon. Gentleman knows that, but I do not blame him for trying.
I hope hon. Members at least understand why we are taking this position on these amendments. I have explained why we have to resist the amendments, citing the financial privileges of this House on this occasion. I therefore urge hon. Members to disagree with this group of amendments.
Chris Leslie
Although the Minister had quite a long preamble, not necessarily on these amendments, all I would say is that, clearly, with life expectancies increasing, it is in general reasonable to ask people to work for longer before retirement. There is no disagreement on that general principle. We need to adjust the public service pension schemes so that they remain sustainable, which is why we support so many of the changes Lord Hutton recommended. However, as hon. Members know, there are certain categories of workers for whom having longer careers is not realistic because of the physical demands of their professions. There are some physical tasks that it is not reasonable to expect a 67 or 68-year-old to undertake.
The Bill acknowledges that in part, by excluding three categories of worker— firefighters, police officers and members of the armed forces—and fixing their normal pension age at 60. That is a rational position, but there are other professions that we believe the Government should keep under review because they also can be exceptionally physically demanding, such as NHS paramedics and care workers. There is clearly a need for some flexibility to accommodate scheme-specific capability reviews for these associated professions, and it is a great shame that the Government have not allowed the latitude for that in the Bill. We debated that in Committee.
Lords amendments 78 and 79 are aimed at correcting what most people thought to be an oversight: the fact that, for some bizarre reason, Ministry of Defence firefighters and MOD police officers are excluded from the definitions of firefighters and police officers in the Bill. There are about 2,000 MOD police and 1,000 or so MOD fire and rescue scheme workers who essentially carry out the same crucial, but onerous, tasks as police and fire service workers under the auspices of the police authorities and the Home Office.
Richard Fuller
I shall attempt to make my points speedily, Madam Deputy Speaker.
The hon. Member for Hayes and Harlington made two requests. He asked when the negotiations that may be conducted between the Ministry of Defence and the workers and their representatives would have to be concluded, and suggested a three-month time frame. I support that recommendation. He also asked for an indication from the Minister, today if possible but otherwise in a subsequent letter to Members, of what the legislative process would be for the reaching of a resolution. I think that both those suggestions are very worth while.
Will the Minister confirm that the assessment by MOD and the workers’ representatives will not specify a particular retirement age, and that the decision will be based on an assessment of the potential ability of members of those work forces to do their jobs effectively? Will he also confirm—I think he said this earlier, but confirmation would be helpful—that the scheme will be flexible enough to allow us to make the changes without any limit, but that it will be up to those in the scheme to make the recommendations? I hope that he will be able to make those two commitments today.
It is important for the Government to be able to maintain a dialogue about the retirement age of our firefighters, both in the MOD and outside it. We are embarking on unknown territory, and I think that a Government who listen to these workers will be seen to be truly putting their money and their heart where their mouth and commitments are.
Sajid Javid
I thank all who have spoken during the past hour. I also thank my right hon. Friend the Member for East Yorkshire (Mr Knight), who could not speak in the debate, but who has an interest in the issue and has made representations to me on behalf of his constituents. I hope that I shall be able to respond to the points that have been made in the time that is available to me.
Both my hon. Friend the Member for Argyll and Bute (Mr Reid) and the hon. Member for Banff and Buchan (Dr Whiteford) made a number of points. As they will understand, I could not agree with everything that they said, but they both made the sensible point that the Treasury and the MOD should take account of those who retire early on health grounds when considering the potential cost implications of the changes that we are discussing. I agree that we must bear in mind all the impacts on costs that the amendments might have.
My hon. Friend the Member for Stevenage (Stephen McPartland) also raised a number of issues, including the important issue of the Opposition’s credibility in this regard. Some MOD firefighters and police officers who are listening to the debate will already have a retirement age of 65 rather than 60 because of the changes made by the last Government in 2007. When the hon. Member for Nottingham East (Chris Leslie) speaks about such matters, his own credibility becomes somewhat shallow.
I do not often agree with the hon. Member for Blaydon (Mr Anderson). I again did not agree with much of what he said, but I know he believes passionately in what he says, and I respect fully what he had to say. He is a great advocate for his constituents, but he, too, did not address the issue of the change that was made in 2007, and nor did his party colleague, the hon. Member for Hayes and Harlington (John McDonnell). For the purposes of this debate, it would be useful to know whether the hon. Members who have spoken up today also did so when the retirement age was changed in 2007.
Mr Anderson
If the Minister checks the record tomorrow, he will see that I specifically said I made a mistake, and I also made a point about the Liberal Democrats not raising this issue at that time. The Minister is therefore wrong if he is saying I did not deal with the issue.
Sajid Javid
That is characteristic of the hon. Gentleman, as he opposes a lot in this Chamber, and perhaps did so even when his party was in government.
My hon. Friend the Member for Colchester (Sir Bob Russell) raised a number of points. I agree with his comments about fitness for the purpose. He asked about whether MOD firefighters and police officers are fit for the purpose and that is key, because it is essential that we set retirement ages that are appropriate for the jobs in question, as I said in my opening speech.
My hon. Friend also touched on the related issue of pension contributions. If we just accept these amendments, there will be consequences from the changes. The hon. Member for West Dunbartonshire (Gemma Doyle), speaking for the Opposition, intervened on my hon. Friend on that matter, but what she said was wrong, because there would be consequences. We would have to think about who would pay for these changes, and if there were a change in the retirement age we clearly could not have a situation where, for instance, the civilian firefighters and the MOD firefighters had the same retirement age but paid different pension contributions. We would have to consider such issues. The hon. Lady knows that such issues exist, and it does not serve this House well to pretend they do not.
Chris Leslie
The Members who have engaged in this debate were asking the Minister to see whether there would be any movement, and one issue raised was the time frame for any potential negotiation on movement. I happen to think we should hold out for 60—that that should be the decision today—but I do want to ask the Minister: is he sure there is the potential for going to 60 for MOD firefighters and civilian firefighters without primary legislation? I am worried that, if we let this matter pass today, we might not be able to deal with it through regulations and secondary legislation, and that we will instead require primary legislation if we are to have the potential to get parity. Can the Minister confirm that we would need primary legislation for that?
Sajid Javid
I was going to come to that issue, because my hon. Friend the Member for Bedford (Richard Fuller) and the hon. Member for Hayes and Harlington, as well as the Opposition spokesperson, raised it. I will say a bit about the MOD process, but first let me repeat an important point: this is a broad-ranging Bill to deal with all public sector pensions, affecting approximately 12 million individuals, by addressing the issue of increasing life expectancy and seeking to find the necessary savings in a fair way from employees, employers and the taxpayer. It is framework legislation: it sets the general framework for individual schemes, but that is all it does. It is for the individual employer organisations and the employees to negotiate the terms of each scheme.
We deliberately set up the legislation to provide significant flexibility, so that if the MOD, and therefore the Government, decide at a later date that the retirement age needs to change, it would not require further legislation. The MOD can make the decision in discussion with stakeholders and others. The legislation will give not just the MOD but all public sector employee organisations flexibility to deal with the particular circumstances of their schemes.
John McDonnell
When the legislation leaves this House and goes back to the other place, could the Minister write to us explicitly about the generality of the Bill—about its being a framework Bill? It seems curious that a framework Bill lists a number of categories of worker whose retirement age will be at 60. That is why many people felt they needed to be included in that list if they were to be protected. It seems odd that the Minister is now saying, “Don’t worry because it is a general framework Bill.”
Sajid Javid
The Government have been very clear that one of the purposes of the Bill is to deal with increasing life expectancy and longevity. That is why retirement ages are increasing for almost all public sector workers, and there is a link to the state pension age. The Government must address the issue; it was something the previous Government ducked, but it is vital for making the public finances more secure. That situation has not changed. What I am outlining today, with regard to the issue relating to MOD firefighters and police officers, is that there is flexibility within the MOD scheme for it to come up with a different arrangement. The MOD has agreed to look into that. It has not made any decisions, but I am sure that it will look very carefully indeed at the issue.
Chris Leslie
The Minister says that the Bill is flexible. May I direct him to page 23, schedule 1, where there is a definition of fire and rescue workers? It states:
“In this Act, ‘fire and rescue workers’ means persons employed by…a fire and rescue authority in England or Wales…the Scottish Fire and Rescue Service, or…the Northern Ireland Fire and Rescue Service Board.”
Currently, that reference does not include Ministry of Defence firefighters. Can the Minister tell us that it does not require primary legislation to amend schedule 1 in that way?
Sajid Javid
I thought I made myself clear but I will say it again: it would not require primary legislation if the MOD decided it was appropriate and right to make any changes to the retirement age.
Simon Hughes
The Minister is being very helpful. In answer to an earlier question, he alluded to the timetable that has started. Would it be reasonable to assume that the negotiations are intended to be concluded by the MOD during this financial year at the latest?
Sajid Javid
My right hon. Friend asks a good question. I have heard the desire of the House for a timetable and I respect that. I will ask my noble Friend Lord Newby to speak further on that point tomorrow.
The hon. Member for Hayes and Harlington asked me to write to him on a specific issue, and I will. I heard that point.
This has been a passionate debate. The Government have been very clear that we value tremendously the work of MOD firefighters and police officers. We have heard clearly the issues that have been raised today and how passionately they have been argued. I hope that I have managed to persuade some hon. Members—no doubt I have not managed to persuade all of them—that the Government take the issue seriously. The MOD will be looking into the issue and has already set the ball rolling. I hope that that will be a speedy process, and I urge the House to vote against the amendments.
Question put, That this House disagrees with Lords amendment 78.
Finance (No. 2) Bill
Sajid Javid Excerpts(11 years, 8 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Cathy Jamieson
I thank the hon. Gentleman. He has put his position firmly on the record in exactly the way I would anticipate, because I know from the work that he has done on the Scottish Affairs Committee and elsewhere that he takes this issue extremely seriously and is not slow to make points that are often not entirely in line with his Government colleagues if he feels that that is the right thing to do. His comments are very important.
I want to finish by probing the Minister further to see where the Government intend to go with this. Although representations have been made, the Government have not committed to anything other than looking at the rates for this year and the year ahead. It is unclear whether they intend to address any anomalies and conduct further work—perhaps building on various independent reports and the work of the Transport Committee—in order to consider the issue in more detail.
Those who tabled the amendments will not be surprised to hear—I suspect they expected me to say this—that we will not support them. I look forward to hearing what the Minister has to say about how we might usefully take this issue forward, not just for the benefit of Scotland, Wales and Northern Ireland, which are very important, but for the benefit of the various regions and areas of England where hon. Members are making a case on behalf of their constituents.
The Economic Secretary to the Treasury (Sajid Javid)
I thank all hon. Members who have taken part in this energetic debate, which has aroused strong passions in some parties.
Clause 183 sets the air passenger duty rates for 2013-14. These rates were first announced at Budget 2012 and took effect from 1 April 2013. The rates have increased by inflation only. Because of rounding, band A has remained the same, so about 80% of passengers have seen no cash-terms increase in the rates they pay.
Clause 184 gives Her Majesty’s Revenue and Customs the power to require payments on account in relation to the APD annual accounting scheme, which was introduced to minimise administrative burdens for the extension of APD to business jets and will improve the fairness of the tax overall. The clause also updates the list of territories in band B of APD to include the new nation of South Sudan.
It is important to recognise the need for the aviation sector to make a fair contribution to the public finances. I remind hon. Members that no tax is levied on the fuel used in international and almost all domestic flights. Moreover, no VAT is levied on international flights and, unlike many other countries, the UK does not charge VAT on domestic flights.
It was in recognition of the fact that aviation was under-taxed compared with other sectors of the economy that APD was first introduced in 1994. It was introduced purely as a revenue-raising tax and it remains a vital revenue-raiser today. However, despite the challenge of the budget deficit that we inherited, this Government have limited increases in APD to inflation only in the period since 2010-11. During this period, rates have increased by only £1 for the vast majority of passengers. Furthermore, recognising the sector’s need to plan ahead, we have provided greater clarity on future rates. Budget 2013 set out that the rates for 2014 and 2015 will rise in line with inflation only. The real burden of APD will remain unchanged for a further year.
Phil Wilson
On the effect of APD on regional airports such as Durham Tees Valley airport in my constituency and Newcastle airport a few miles from the Scottish border, will the Government consider regional APD variations that might incentivise airliners to fly from airports other than Heathrow and Gatwick?
Sajid Javid
As the hon. Gentleman will know, the Government have looked at that in the past and have ruled it out thus far, because the evidence shows that it would lead to significant distortions in the UK market. He will also know, however, that we keep all taxes and duties under review to see whether improvements can be made.
Before I move on to the proposed devolution of taxes, I want to touch on the extension of APD to business jets. A new higher rate has been introduced for passengers travelling on planes offering an enhanced level of comfort. APD on these flights is double the prevailing standard rates for business and first class. These changes improve the fairness of the tax overall.
New clause 3 proposes devolving to the Scottish Parliament and the Welsh Assembly the power to set APD rates on direct long-haul flights from Scotland and Wales. New clause 4 and new schedule 1 also propose cutting the rates for direct long-haul flights from Wales to the short-haul rate in advance of devolution from 1 April 2013. The issue of APD devolution is a complex one. As we have heard, it was considered in the 2011 consultation and has been debated several times since then, including here today.
Mr MacNeil
Is the hon. Gentleman saying that there is a competitive disadvantage from APD only where there is a land border with another country or member state? Is that the position of the UK Government?
Sajid Javid
The hon. Gentleman knows the answer, but I shall provide it anyway. As he knows and as we heard from my hon. Friend the Member for Argyll and Bute, passengers who might go to Belfast have the opportunity to travel to Dublin by car. Clearly, that opportunity does not exist in Scotland.
We are working closely with the Northern Ireland Executive to consider options for rebalancing the Northern Ireland economy, and we are carefully considering the recommendations of the Silk commission in Wales. Any devolution of APD, however, must take into account the broad range of views on this subject. In response to the 2011 consultation on APD, a substantial number of stakeholders raised concerns about devolution complicating the APD system and creating distortions in the markets for flights. This concern was reinforced in a recent report by HMRC suggesting that the devolution of APD could lead to market distortion as a result of passenger redistributions between UK airports, without substantially increasing demand for aviation overall.
In considering whether to devolve APD, hon. Members will surely agree that we must assess the risk of replicating the same problems that Northern Ireland faced from lower aviation taxes in the Republic of Ireland. There is clearly a concern about an immediate cut in APD rates for direct long-haul flights from Wales. The Government therefore believe that the devolution of APD is a subject that requires continued and careful evaluation, if we are to be confident about its potential effects across the country as a whole. In undertaking this evaluation, we should take note of recent data showing that passenger numbers are growing at Scottish airports. Between 2010 and 2011, numbers grew by 5.5% and continued to grow last year as well. In fact, Glasgow airport achieved growth of 4% in 2012, Aberdeen airport recently achieved 24 months of consecutive growth and Edinburgh airport will provide more choice to passengers in 2013 than ever before.
Hywel Williams
Will the Minister tell the House what happened to passenger numbers from Cardiff airport over the same period?
Sajid Javid
I do not have the numbers to hand for Cardiff airport, but I am sure that the hon. Gentleman knows the answer. If he wants me to find out for him, however, I shall write to him with the numbers, if they are available.
Talking about Wales, we are considering the Silk commission’s recommendations, as I have said, but we must also take note of the concerns of Bristol airport, which has expressed deep concerns to me that devolution to Wales would have a significantly detrimental impact on its business. In presenting his amendments, the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) referred to the report by the CBI in Wales. However, I have an extract from—I believe—the same report he referred to, which says that
“high mobility between Wales and the UK…is a reason for the rate to remain consistent between the countries.”
Our analysis needs to be based on a full examination of the evidence. We will not be rushed or pushed into making premature judgments. On that basis, I ask hon. Members not to press their new clauses.
Briefly, the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson) raised the issue of APD rates to the Caribbean. As she rightly said, I recently met a delegation of hon. Members to discuss that important topic. I am the first to accept the valuable contribution that British people of Caribbean heritage make to our country. I have promised to reflect on the important points raised by that delegation and many others that have brought up the same issue.
We have a plan to cut the deficit and we have already cut it by a third. Our country’s credibility comes from delivering that plan. APD revenues make an important contribution to the public finances and this year’s inflation-rate increase is necessary. The extension of APD to business jets makes the tax fairer overall. I therefore urge that both clauses in this group stand part of the Bill and ask hon. Members kindly to consider withdrawing their proposed new clauses.
Mr MacNeil
I can tell the Minister straight away that we will not be withdrawing our new clauses; we will be pressing them to a vote.
This has been an enjoyable debate. I certainly enjoyed the contribution from the hon. Member for Central Ayrshire (Mr Donohoe), who is not in his place at the moment. [Interruption.] I am told he is on a plane to Inverness. I wonder. I have found an exchange in Hansard between him and me from March this year, when I pointed out to him in an intervention that the UK’s tax
“is reputed to be the world’s most onerous tax on air travel, and I am sure the hon. Gentleman will agree that it is damaging Scottish airports terribly.”
From everything that he said today, we might be under the impression that a certain answer was given, but no. The answer he gave was:
“I do agree with the hon. Gentleman on this occasion; it is not very often I can say that. The Government are doing absolutely nothing for air passengers, the aviation industry and those who work in it. They continue with this tax, while our competitors throughout the world are laughing at us.”—[Official Report, 25 March 2013; Vol. 560, c. 1332.]
I just wish the hon. Gentleman was here now, to come through the Lobby with us and put some meaning into his words.
The hon. Member for North Antrim (Ian Paisley) made a very good speech when, as I see it, he described air passenger duty as a win-win situation. I welcome the fact that air passenger duty was devolved to Northern Ireland and I wish those in Northern Ireland well. I hope it succeeds and I hope the economy there grows from strength to strength. The devolution of air passenger duty to Northern Ireland will benefit us all, whether we live in Scotland, England, the Republic of Ireland or Wales. We have nothing to fear, only fear itself. In years to come, when the Northern Ireland economy—hopefully —develops with that, we will see the wisdom of devolving that power and the folly of not devolving it to other parts.
My hon. Friend the Member for Carmarthen East and Dinefwr (Jonathan Edwards) made a very strong speech—a star speech, in fact. He mentioned the Silk commission and Labour’s immediate need to devolve APD—it was the other week, but of course there is no sign of Welsh Labour in this place today. The word “immediate” has a different meaning for Labour Welsh Members from its meaning for the rest of the English-speaking world. The hon. Gentleman certainly gave us a scary update of the economic situation in Wales, where people face the double whammy of Labour in Cardiff and the Tories in London, with their wee pals in Westminster, the Liberals, giving them a hand. He reminded my colleagues just how fortunate we are to have the SNP Government in Scotland, led by luminaries such as Michael Russell, Kenny MacAskill, Nicola Sturgeon, Alex Neil, John Swinney and, of course, Alex Salmond, the First Minister.
The hon. Gentleman reminded us that the Westminster branch of the Labour party does not want to give powers to the Labour Cardiff branch. Clearly, the Labour brothers in Wales are as happy a band as those in Scotland. We wonder whether they will send an ambassador to Inverness this weekend—I doubt it. They are probably having a punch-up, one with the other, in Cardiff.
Talking of punch-ups, that brings me to the hon. Member for Argyll and Bute (Mr Reid), who offered himself to the Chamber as a punch bag and was taken up on that offer. My hon. Friend the Member for Moray (Angus Robertson) repeatedly asked him what his policy was and he repeatedly failed to answer the question. He was even offered the policy free by the SNP, but he would not adopt it, just in case, such was the level of uncertainty. He is a nice fellow but his politics are sadly lacking. The arms are open—if he wants to cross the Floor and join the SNP, he will be welcome. It is his politics he has to change.
The hon. Gentleman said that the SNP had not made the case. Hang about. Any daft case the Conservatives make and the Liberals happily wander through the Lobbies, be it on tuition fees, the bedroom tax—whatever it is, it is yes, yes, yes from the Liberals. He seems to be unable to make the case himself for APD to be devolved to Scotland—that was sadly lacking. Will he vote tonight for clause 183? Will he come through with us on clause 183? Will he vote against the increase or will he vote for it?
Finance (No. 2) Bill
Sajid Javid Excerpts(11 years, 8 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mark Lazarowicz
As time is limited, I take this opportunity to pursue with the Minister some of the issues raised earlier by colleagues on the Opposition Benches about how the schemes will operate in Scotland and Wales—outside England. I hope the Minister can answer these questions.
Will the Minister confirm that the mortgage guarantee scheme will apply to Scotland, Wales and Northern Ireland as well as to England? If that is the case, will he indicate which Department will operate it for Scotland and the other devolved areas? If it is to be the Department for Communities and Local Government, I suggest that it would be more appropriate for the scheme to be operated by the Scottish Government or the relevant devolved Administrations.
Would it be possible for the Scottish Government and the other devolved Administrations to amend the scheme to take account of the objections raised, which will no doubt be shared by all of them, that it would benefit the buyers of second homes and people on relatively high incomes? In most parts of Scotland, Wales and Northern Ireland, prices of £600,000 are very much at the higher end of the housing market.
If someone in one of the devolved areas defaulted under the mortgage guarantee, would the cost be borne by the Treasury or the devolved Administration? I appreciate that these are technical questions but I am sure that, as the Minister has thought through the policy in great detail, he will be able to answer them.
The Economic Secretary to the Treasury (Sajid Javid)
I thank all Members for their contributions. This has been a thoughtful and engaging debate.
Both new clauses are about housing. New clause 1 would require the Government, within three months of Royal Assent, to provide a report to Parliament on how the tax system supports those seeking to purchase a second new home and how the Government plan to prevent it. New clause 5 suggests introducing a mansion tax on properties worth more than £2 million, with a view to using the revenue to fund a tax cut for those on low or middle incomes.
The Government oppose both new clauses. I will elaborate on the reasons, but first allow me to make a few points about the significant steps the Government have already taken and about our overall housing strategy, as many issues relating to it were raised this afternoon. I shall also respond to some of the other issues that were raised.
The new clauses centre on the housing measures in the Budget. The Government announced a major new package to support new development and affordable housing, alongside reforms to the planning system. The measures included the Help to Buy equity loan scheme and the Help to Buy mortgage guarantee scheme. They will give a much needed boost to housing supply, and equip those who aspire to own their home with the tools to do so.
John Mann
Would the Minister accept that, with the affordable housing levy the Government have brought in on single properties, those who build their own home now face a minimum £40,000 tax per property? In Hertfordshire, it is £187,000. That will kill off aspiration for those who wish to build their own home.
Sajid Javid
What the Minister will accept is that this Government have done more than any other in recent times to help those who aspire to purchase their own home. The Budget announced financial support of £5.4 billion for housing, which builds on the £11 billion of support already committed during the spending review period. The Government are also taking significant action through our build to rent and affordable homes guarantees programme.
Alongside those measures, the Government are reforming the planning system to ensure that reforms will increase housing supply. Planning constraints have depressed the supply of new homes. The Budget announced that the Government will take further steps to make the vital planning reforms that are needed to ensure that we have a regime that is simple to access, supports growth and is responsive to housing need. As hon. Members will see, this Government have a comprehensive strategy for housing, we have taken significant action, and those measures will give a much needed boost to both the demand and the supply side of housing.
I shall now discuss the new clauses. New clause 1 proposes that the Government provide a report to Parliament, three months after the passing of the Bill, to ensure that the tax measures do not benefit those who are purchasing a second home. The Government have already taken steps, through the tax system, on the issue of second homes. We have changed the discounts on council tax for second homes, through the Local Government Finance Act 2012. From 1 April 2013, billing authorities in England will be able to charge up to 100% council tax, instead of between 50% and 90%, on properties that they consider to be second homes. That corrects an imbalance permitted by the previous Government, which allowed second home owners to pay less than those with a single property.
The report suggested is wholly unnecessary, but in today’s debate issues have been raised about the Help to Buy scheme, particularly whether it will support those who wish to purchase a second home. We have already made it very clear that second homes will not be eligible for the Help to Buy equity loan scheme. The scheme builds on the existing successful First Buy scheme, and is able to use existing processes. In the new scheme the Government, through the Homes and Communities Agency, have a more direct relationship with the purchaser, and require a legal declaration by the purchaser’s solicitor that the property will be the purchaser’s only and main residence. The Chancellor has also been very clear that the intention of the Help to Buy mortgage guarantee scheme is to help people buy their first home, or to move up the property ladder as their family grows. But the mortgage guarantee scheme represents a major new intervention, and we must ensure that we get it right.
Chris Leslie
May I clarify the announcement that I think the Minister is making? Is he saying that there will be a requirement, as a covenant within the mortgage deed arrangements, to exclude the use of any equity from remortgages and so on for second home purposes? That, essentially, is what he has announced.
Sajid Javid
What I am saying is that, at the Budget, we set out a scheme outline. Now we need to work, with lenders and other stakeholders, on the detail. We want to ensure that we avoid any unexpected adverse consequences of the scheme, such as attempts to use it to purchase second homes. We want to look at this carefully, and we want to ensure that we discuss the details with industry. We have already started this process, and we will report back to Parliament in due course. Therefore the report suggested by new clause 1 is wholly unnecessary.
Bill Esterson
This is a really important point. What the Minister has not announced is that, if somebody is moving up to a second home, they must sell their first home. Can he confirm that they will not be able to keep that first home, because otherwise it will mean that people will be able to get a second home by using the scheme?
Sajid Javid
The hon. Gentleman raises a good point, which is that it is the Government’s duty to carefully consider what is meant by a second home. He has given as an example the situation in which someone has no intention of owning two homes, but is in the process of moving home. Let me share another example. There are couples who unfortunately get divorced, and there may be a need for another home as the family splits. The question then arises, is that a second home or not? It is sensible for the Government to examine such issues carefully as we flesh out the details.
Sajid Javid
In the interests of time, I must press on and answer some of the questions that were raised, including by the hon. Gentleman.
The hon. Member for Edinburgh North and Leith (Mark Lazarowicz) and others asked about the devolved authorities, in particular Scotland. The mortgage guarantee scheme is a UK-wide scheme and will be available to all UK residents, including of course those in Scotland and other devolved areas. The mortgage equity scheme is an England-only scheme as housing is a reserved issue among the devolved authorities.
Sajid Javid
The right hon. Gentleman asks a good question. Those are some of the details that we will flesh out. If he will allow me, I will look into the question further. I hope it is clear to him that the intention is that the mortgage guarantee scheme is a UK-wide scheme.
In the time that I have left, I shall turn to new clause 5. We have always been clear that the proposed mansion tax is an issue on which the two parties of the coalition have differing views. Our Liberal Democrat colleagues have supported the principle for some time, as we heard today so eloquently from my hon. Friend the Member for Bristol West (Stephen Williams). In contrast, Conservative Ministers have very real concerns about such a proposal.
We have concerns that a third of properties in London worth more than £2 million have been in the same ownership for 10 years, and that a mansion tax could hit asset-rich but potentially income-poor households. We have concerns that a family could live in a £2 million house, but have a very large mortgage. That would mean that their net wealth was a lot lower than the actual value of the home. We have concerns that any mansion tax would be administratively burdensome for HMRC to operate, not to mention intrusive for the person having their home inspected. But Opposition Members should be aware that we are taxing anyone purchasing a new home at this high value through the stamp duty land tax of 7% on residential properties costing £2 million or more. That is a policy that is easy to administer and it will not impact on existing home owners.
The Opposition have proposed that a mansion tax could pay for a tax cut for millions of people on low and middle incomes. The Government have already introduced tax cuts for those who need it most. We are increasing the personal allowance to £9,440 from April—the largest ever cash increase. That will be increased by a further £560 to reach £10,000 in 2014-15, meeting the Government’s commitment a whole year early. That is a tax cut for 24 million people and together takes 2.7 million people out of income taxation altogether.
Budget 2013 also announced that the fuel duty increase planned for September will be cancelled. The Finance Bill keeps fuel duty frozen at current levels, resulting in the longest freeze in fuel duty for 20 years, helping households and businesses with the cost of motoring.
Meanwhile, those with the highest incomes continue to contribute the most. This year the top 1% of taxpayers—those with an income of more than £150,000 a year—will pay approximately a quarter of all income tax. The top 5% of taxpayers—those on incomes of £68,000 or more—will pay nearly half of total income tax. As part of the Government’s commitment to create a fairer tax system, since 2010 the Government have raised taxes on the rich in every Budget. Budget 2010 introduced a higher rate of capital gains tax, Budget 2011 tackled avoidance through disguised remuneration, and Budget 2012 raised stamp duty land tax on high value homes and announced a cap on income tax reliefs. The autumn statement of 2012 took action to reduce the cost of pensions tax relief.
In Budget 2013 we announced further significant measures to tackle aggressive tax avoidance and offshore tax evasion by high earners. The richest now pay a higher percentage of income tax than they did under the previous Government. No doubt those on the Opposition Benches think a better approach would be to introduce a new starting rate of income tax, but let us not forget that the 10% rate is a policy that they introduced and then scrapped once before, to the cost of many further down the income scale—the people whom they claim they want to help. Fortunately, the Government have a more coherent income tax policy, as we heard from my hon. Friends the Members for Stevenage (Stephen McPartland) and for Bristol West. Our increases to the personal allowance have replaced the 10p rate, which Labour doubled; there have been successive increases to the tax free personal allowance. Effectively, we have introduced a 0% band.
Geraint Davies (Swansea West) (Lab/Co-op)
On a point of order, Mr Amess. The Minister is not addressing new clause 5. Surely this is not in order.
Sajid Javid
I do think that it is relevant because the issue came up during the debate, but I take your guidance, Mr Amess.
The Government are committed to making the aspiration of home ownership a reality for as many households as possible. The housing measures introduced in this Budget will tackle long-term problems in the housing market, giving a much needed boost to housing supply and supporting those who want to get on or move up the housing ladder. Introducing a mansion tax would create real fairness issues by hitting asset rich but potentially income-poor households. It would serve to create only complexity and uncertainty. The Government have already made huge strides towards a fairer society and a stronger economy, and new clause 5 will not further that. I ask hon. Members not to press the new clauses.
Chris Leslie
Given the constrained time available under the Government’s programme motion and the need to move on to other issues, I do not wish to press new clause 1 to a vote, but it is important that we continue to press Ministers for some firmer answers on their Help to Buy scheme, which gives the impression of having been written on the back of an envelope without much thought and without looking in sufficient detail at some of the questions that have arisen in the course of the last few hours, whether with regard to devolved Administrations or second home purchases. Therefore, it is necessary to consider this further during the Bill’s passage.
However, it is important to test the view of the House on new clause 5, particularly given the speech of the hon. Member for Bristol West (Stephen Williams), who, in an acrobatic display of contortions that tests even the most adept of Liberal Democrats, managed to find a way to oppose a policy that he has supposedly advocated for a long time. Even when we agreed that the policy was the same, raising £2 billion on mansions worth over £2 million and using that money for a tax cut for low and middle-income households, he could not bring himself to abstain on the issue but will vote against the new clause. Therefore, we must test the view of the Committee.