Finance Bill
Alex Cunningham Excerpts(9 years, 1 month ago)
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Rob Marris
The hon. Lady is right, of course, that it varies around the country and that there is a much greater tendency to pay it in London and the south-east—the area she represents—but I stand by my remarks that for many of those people, the liability of their estate to inheritance tax is occasioned by a windfall increase in the value of the home in which they live. Some people improve the houses in which they live, but in the last 20 or 30 years, the great driver for estates falling into inheritance tax liability has been a secular rise in house prices. That is not as a result of people doing up their houses, although of course that happens. And good luck to them. Many hon. Members, including myself—and my wife—own the house in which they live. I, along with others, will have a windfall—and it is a windfall—from the secular increase in house prices.
Alex Cunningham (Stockton North) (Lab)
I congratulate my hon. Friend on his promotion to the Front Bench. Does he agree that these Tory proposals amount to a north-south divide policy? While hundreds of thousands of people in the south benefit from the increase in property values, carry this great wealth and want to leave it to their families, families in the north do not have the same advantage—or very few of them do. Is it not another north-south divide policy?
Rob Marris
I certainly agree with my hon. Friend. We already have enough geographic and regional divisions in this country, and I do not want their number to increase. Of course, when we legislate we must be aware of the different impacts that the measures that we introduce may have in the country of the United Kingdom, both its regions and its nations. However, there are many places in the United Kingdom where few people will pay inheritance tax, and in the country as a whole, without the changes that would be brought about by the Bill—if the House were to pass them, which I hope it will not—it is forecast that 63,000 estates would have a tax liability by 2020-21. According to the House of Commons, the proposed changes would reduce that to about 37,000, the same level as now.
In absolute terms, 37,000 represents quite a lot of estates, but in proportionate terms it is a very small amount—well below 10%—and in the case of many of those estates, the tax is payable because of a windfall. For many people—again, not all of them—that windfall was brought about when they bought their houses with mortgage interest relief at source: MIRAS. Those people acquired an asset which upon their death, after a secular rise in house prices, led to inheritance tax being a liability, and they acquired that asset with the help of the state; in other words, the help of the taxpayer. Now some of them cavil at inheritance tax, which I think is very unfortunate.
The effects of the proposed inheritance tax changes could be wider than the Government may have thought. When we stop and think about it, we must conclude that it is not surprising that many of those who would benefit because their parents have an estate worth more than £650,000 are themselves well-to-do. There is nothing wrong with being well-to-do; all Members of Parliament are well-to-do, and I have been in the fortunate position of being well-to-do for most of my life. However, when a Government propose a tax regime in which they will favour those who are already favoured, we really have to question their priorities.
The Government’s proposals will make inheritance tax more complicated, and it is already fairly complicated. Successive Governments—the Labour Government under whom I was a Back-Bench MP, the Conservative party which was then in opposition, the coalition Government whom we have just seen and, I venture, the current Government, and certainly the current Opposition—have wanted a simpler tax regime, but that is extremely difficult. We have a Finance Bill, the second of this year, which is about a centimetre thick and runs to more than 200 pages. I am not a tax expert or an accountant, but as far as I can tell, it is owing to the cunning of professional accountants who, quite legitimately, provide tax avoidance advice that we have to keep introducing loophole-closing measures that complicate the tax system. The Government are making the inheritance tax regime more complex in a way that is unfair because it favours those who are already well-to-do. The combination of forgone tax revenue and additional complexities does not amount to a desirable policy.
Alex Cunningham
Does my hon. Friend agree that the policy will further escalate the inequality between the people in our communities and throughout the nation? There are people who may work very hard but must depend on the likes of tax credits in order to exist, and have no opportunity to build any wealth whatsoever; and there are people who can inherit a property that may be worth £2 million, and then simply exploit that wealth in order to become even wealthier, to the detriment of everyone else in the country.
Rob Marris
My hon. Friend is right. In the constituency that I have the honour to represent, and in which I have lived for almost all my life, I could find no house worth more than £2 million when I looked in April this year. Indeed, none of them was near that value. There is barely a house that is worth over £1 million in the whole constituency, and of the three Wolverhampton constituencies, the one that I represent is undoubtedly the most affluent. The same will apply across swathes of constituencies: there will no houses worth that amount. The idea that an affordable house, as has now been defined by the Prime Minister, is £450,000 in London or £250,000 outside London is frankly a joke in constituencies like mine. For £250,000 it is possible to get a fantastic house in Wolverhampton. We welcome people in Wolverhampton—come to Wolverhampton: decent schools, good cheap housing, no traffic jams to speak of; fantastic, so come—but £450,000 will buy almost any house in Wolverhampton South West.
Rob Marris
It is difficult to tell what we can afford as the Conservative party, in government since 2010, has consistently failed to meet financial targets for dealing with the deficit. The Opposition agree with the Government that the deficit needs to be tackled, but we disagree on the way in which it should be done. Forgoing £2.5 billion —if that is the exact figure, and I think my hon. Friend is probably right that it is of that order of magnitude—in a very regressive way is something that Labour Members would not countenance, but we need to look at the whole regime, hence the wording of new clause 9.
There will also be complications with the wording of the inheritance tax provisions. There is a feeling of unfairness among some as to the definitions—which I will not go through tonight—of a linear descendent. Many, if not all, Members will know from our own lives, advice surgeries and places we live that the definition of a family and those who are regarded by someone as being a member of their family are somewhat fluid in our society, and have become much more fluid in the last 50 years in terms of social recognition. For example, the Labour Government introduced civil partnership legislation, which I welcome—it is possible this Parliament will extend that to opposite-sex couples—and, commendably, in the last Parliament gay marriage was put on to the statute book. Those are concrete examples, dealt with by this House, of the fluidity and changing nature of family structures, but the provisions in this Bill rather lock in whether somebody is, or is not, regarded as a member of a family. Inheritance tax in this Bill is a bit of a problem, therefore, and I urge the Government to accept new clause 9 and amendment 89, which in a sense is a stand part motion.
I will now turn to value added tax, enforcement by deduction from accounts and the climate change levy—unless any Member wishes a quick run-around again on inheritance tax, but I suspect not.
Alex Cunningham
On the question of equality in our nation, we have seen the Government deliver huge tax cuts for their friends in the City and the hedge fund managers. We would rather that money went to the needy in our society, so that they do not have to rely on loans from the loan sharks that our friends on the Government Benches make some money from as well. Does my hon. Friend agree that the Government’s proposals will do us out of the chance of recovering some of this wealth when these people die?
Rob Marris
I agree that it sometimes seems that the policies of this Government are not only to shrink the state, but to give to those who already have and take away from those who have not, for example in terms of tax credits. I will not be drawn by my hon. Friend on the subject of tax credits, but it does seem a rum state of affairs. It is the sort of thing that drew people like me to join the Labour party, to fight for that kind of equality and to fight against regressive taxation.
Alex Cunningham
I hope my hon. Friend will indulge me further on the question of equality. Not everybody can go into court or argue with HMRC, as they do not have the skills and understanding always to take on all these intricacies of debts, claims and this, that and the other. Where people do get to court, they find protection there for them, because they can argue their case in front of a judge and make various points, and the judge can actually aid them. These people cannot afford to have legal representation, because there is no legal aid any more, and so they are in a better position because the judge can actually help them a little.
Rob Marris
I agree with my hon. Friend on that. It is no coincidence that my hon. Friend the Member for Walthamstow (Stella Creasy) is in her place tonight, as she has done sterling work on trying to stand up for the financially disadvantaged. I thank her for her work on so-called “payday lenders”, because when I tried as a Back Bencher under the last Labour Government to amend a Finance Bill to give the Government the power—just the power—to cap payday loan rates, I could not get a Labour Government to go even that far. She has done magnificent work because, as my hon. Friend the Member for Stockton North (Alex Cunningham) said, this is to do with protecting the financially vulnerable. That is why it is a big step forward. I congratulate the Government on introducing the safeguard that an assessment must be made of the vulnerability or otherwise of the alleged debtor and that that assessment must be recorded in writing.
Rob Marris
I agree that progress can be pitifully slow under Conservative-led Governments, and that sometimes those Governments are very slow learners. With regard to the work that my hon. Friend has done, which has an echo in the safeguards under clause 47, she has persuaded the Government to be less hard-nosed and to be more “listening” about financial vulnerability than they had previously been and much credit for that success must go to her for her work with charities and others.
New clause 10 seeks in a very reasonable and moderate way to have a review of the effects of clause 47. The review would cover the total amount recovered, and whether it was as expected. It would cover the number of cases dealt with: would it be 11,000, because at one point the Government thought that it might be 19,000? It might also provide some measure of the effectiveness of the new procedure. I say to the Minister that we on the Labour Benches do not like the procedure, because it smacks of hypocrisy—of the Government, not of him personally. It is a case of, “It’s one rule for them and another for us. The court system is not working, so we will do a workaround on that.”
I now wish to turn to new clause 11 on the climate change levy, and to amendment 90, which would delete clause 45 on the CCL. In a sense, the proposal is a double negative. If clause 45 were deleted, the exemption would be restored. Again, I urge the Government to look at both these measures, which retain, certainly for the moment, the exemption on the climate change levy and, as stated in new clause 11, look at the effect of the abolition of that exemption. As I understand it, there was no consultation to speak of before the measure was announced. In contradistinction, when a fundamental change to the tax regime of combined heat and power units was introduced, that industry got two years’ notice of exemptions. In this case, this year, there was 28 days’ notice, which is next to no notice at all, because these things have long lead times.
I accept the Government’s figure that a third of this exemption is claimed by overseas producers—if only that were not the case. When many, if not all, western countries address the issue of greenhouse gas emissions, which is the nub of what we are talking about, they tend to offshore the problem. Carbon dioxide intensive manufacturing, using lots of non-renewable fossil fuels, gets relocated by capitalists to places such as China and India, making it look as if the CO2 emissions per capita in the United Kingdom are falling quite dramatically, but if the CO2 emissions in the United Kingdom were to include those for which UK residents and consumers are responsible, we would see a rather different picture. Of course Labour Members are not happy about a third of this exemption money going overseas, but in one sense that is all part of offshoring. As far as one can see, successive Governments have been turning a blind eye to the offshoring of greenhouse gas emissions to China and India and so on, but when we are talking about measures to lessen that, no offshoring is to be allowed under this Government. They should think again.
I am not intimate with the industry—this is after all a finance debate and not an energy debate—but I accept that the cost of the CCL exemption in the five years of this Parliament could be in the order of £4 billion. We are talking about a lot of money. It is symptomatic of this Government being penny wise and pound foolish—if one can be penny wise with £4 billion—because they are cutting the exemption too soon, before the industry reaches self-sufficiency. If the industry were treated like the nuclear industry, we would have 100 years of subsidy before deciding whether the technology worked and it was self-sufficient. I am not suggesting that, but what we have is an industry in which the UK has been pretty successful. Indeed, it is a desirable industry. It is a renewables industry which, on all the evidence of which I am aware, is likely to grow in future years around the world, not shrink. We had some technological lead and a skilled UK workforce, but then the Government take us a step back with what they do at 28 days’ notice to the CCL exemption. I understand that prospective onshore wind projects are, almost as we speak, being abandoned, which is regrettable. That is not to say that every one of those projects should proceed, but it is regrettable if the whole industry is shrinking.
As I understand it, the impact assessment for the changes to the CCL exemption and the feed-in tariff is that there will be 1 million more tonnes of CO2 produced in the UK each year, which seems to be going in the wrong direction. What other financial incentives are there to encourage UK non-domestic users—I am talking about business and the public sector, not households—to use renewables? Secondly, in what ways are the renewables obligation and contracts for difference more efficient and more effective?
Alex Cunningham
This whole issue cannot be divorced from carbon capture and storage and the need for the Government to confirm their support for the two projects in the competition—I think we are due a decision on that in the new year. After that, we need to encourage industry with industrial CCS, especially on Teesside where my constituency sits and where, nearby, we have just lost a large section of the British steel industry.
Rob Marris
It is a tragedy what is happening to steel production around the country, and energy prices are part of the mixture behind it. They are as high as they are partly because we have not got to grips with technology like carbon capture and storage, and that is shackling companies in our country.
Rob Marris
The hon. Gentleman is right that the European energy market and the production of energy within the European Union are a bit of a mess. The United Kingdom is part of that mess because we are in the European Union, but it is a mess here anyway because we have not tackled energy security. Again, the problem started under the previous Labour Government and I berated them for it at the time. I was berating a Labour Government on energy security before I lost my seat in 2010, and on returning to this House five years later, so far as I can tell almost nothing has been done on that front apart from the poisonous deal—in many senses of the word—backed by China and EDF for new nuclear power stations in this country.
One can see a bit of a pattern with what is happening with the removal at 28 days’ notice of the climate change levy exemption for electricity from renewable sources used by non-domestics—non-doms, as it were. The Liberal Democrat policy was for the percentage of taxation to come from environmental taxes to keep rising year on year, and when the Liberal Democrats first came up with that crazy idea in about 2007 I pointed out that it was a bit self-defeating. That has been formally abandoned by this Government, which is not necessarily a mistake, but in the context the issue is what has or has not replaced that policy. Support for large onshore wind is being cut, and support for photovoltaics is being ended one year early. The Government’s policy is to lessen air passenger duty, and they aim to abolish it and to expand airports. That is not good news for the environment. The policy on zero-carbon homes for 2016 is being scrapped, not just diluted. There is a massive nuclear subsidy, which we heard about last week with the visit from China. What will our nuclear industry be built on? State support from China and from France.
Alex Cunningham
I should have declared that I was chair of the all-party group on carbon capture and storage, and I am also chair of the all-party group on energy intensive industries. My grandfather was a miner, so I am pleased to hear the word “coal” mentioned in the Chamber. We have huge resources, particularly under the North sea close to Teesside. Does my hon. Friend agree that we need to see investment now in coal gasification if we are going to provide the natural gas needed by companies such as GrowHow, the UK’s only remaining fertiliser producer?
Rob Marris
I did not know that my hon. Friend had gathered so many accolades, but I thank him for the work he has done on these energy matters, which is particularly important for his constituency interests and for our country. As I said, if we could get the holy grail of carbon capture and storage, our country would be quids in because of the amount of coal we have. I am sadly old enough to remember what was called town gas; I do not know whether my hon. Friend remembers it. Town gas was made from coal, produced and piped, before we discovered abundant natural gas in commercial quantities under the North sea. Yes, we could go back to that, but we need the technology.
Instead, we have a massive subsidy for nuclear energy. Leaving aside the safety issues for the moment, that subsidy is just twice the price per kilowatt hour guaranteed with indexation. Who is proposing it? A combination of France and China—China with, as I understand it, a reactor that has not yet been built anywhere in the world, and France, through EDF, with the wonderful record we see at Flamanville in Normandy, where the reactor is now three times behind schedule at twice the predicted cost and still has not opened. There is a similar story with a similar reactor, also being helped by France, in Finland.
The Government are contemplating huge subsidies in a panic over energy security, which of course will not guarantee energy security as it will take so long to build a new fleet, as they are pleased to call it, of nuclear power stations. Meanwhile, as my hon. Friend the Member for Stockton North points out, we have the craziness of all this abundant coal yet quite insufficient Government-funded CCS research and development through which we could proceed to the gasification of coal as North sea gas is running out.
Alex Cunningham
My hon. Friend may be surprised to learn that I spent 17 years of my career in the gas industry, so I know very well what town gas is. I was pleased to play a part in seeing natural gas come to large parts of the country. It does not matter whether subsidies are for wind, for panels on people’s roofs or whatever else; this is also about the creation of jobs. If we get carbon capture and storage right, a place like Teesside could start to replace the highly skilled jobs we have seen going down the pan over the past few weeks.
Rob Marris
I quite agree with my hon. Friend. We want those highly skilled jobs and we want the cheaper energy that one hopes we can get from that technology. We need the Government to kick-start research and development investment to develop that technology. However, I must caution my hon. Friend. There is only so far I can go in agreeing with him. Yes, we want those jobs, and quite a lot of them will be highly skilled, but it is a dead end for us as a country always to have subsidised jobs. That is the obvious thing to say, but it is a dead end. We need a plan to get from where we are, without energy security and without technological development, to the sunlit uplands where we have that technology and development, and where they are self-sufficient and commercially viable. That will need some support from Government, and the removal under clause 45 of the CCL exemption for electricity from renewable resources used by non-doms is a step in the wrong direction.
The Department of Energy and Climate Change Minister Lord Bourne of Aberystwyth wrote to me on 26 August saying that the Government had committed to delivering on the national infrastructure plan published in December 2014, which contained a number of priority investments. He went on to list some of them. One is rail electrification, and we know what has happened to that—it is on pause. Another is low-carbon energy such as nuclear; we know the cost of that, which is enormous. A third is low-carbon energy such as renewables, but clause 45 is going in the wrong direction on that. Lord Bourne also cites energy efficiency measures such as smart meters, but the evidence on them is mixed, to say the least. Before Conservative Members jump up, I know that it was a Labour Government who started down that route and it struck me as a very odd thing to do at the time.
The final point that Lord Bourne mentions, which will please my hon. Friend the Member for Stockton North, is carbon capture and storage. We need to go down that route, but as I say, we need a bit more help from Government, and the measure in clause 45 goes in the wrong direction—at least, we are uncertain what direction it is going in as there has not been a whole bunch of consultation on it as far as I can tell and I am not aware of an impact assessment.
On 8 July—Budget day, I believe—HMRC put out a consultation document on the subject, which said that one of the factors being examined was the “operational impact” in pounds. It stated:
“Changes in HMRC costs are estimated to be negligible and would fall as part of the existing operational cost of administering CCL. The government will consult Ofgem and NIAUR”—
that is, the utility regulator—
“over summer/autumn 2015 to establish the costs and other impacts on the regulators of removing the exemption.”
That is a consultation, as I understand it, only on the impacts on the regulators, but that might shed some light on the impact on the industry and on employment. I hope that when he responds to the debate, the Minister can address that point.
Tax Credits
Alex Cunningham Excerpts(9 years, 1 month ago)
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Alex Cunningham (Stockton North) (Lab)
This morning on BBC Tees, I debated the issue of tax credits with a Conservative councillor who stood unsuccessfully at the general election. He used an expression that summed up the total lack of understanding among Government Members of how people can be in work but in need of some state support. He referred to people as being “exposed” to the process, as if it was some kind of risk. I understand that that expression might be used by a City person in relation to investments or by a chief executive about a project that his company plans to undertake. In both cases, I am sure that they would develop a plan to mitigate the risk of failure. The millions of people who will be affected by the tax credit cuts are not exposed to a risk that they have the power to mitigate. Rather, they are having cuts to their income imposed on them and there is little, if anything, that most of them can do about it.
Barbara Keeley
One group that will be hit is family carers who receive carer’s allowance and work 16 hours on the minimum wage to supplement their benefit of £62. There are 689,000 carers in that position. Carers UK says that all carers who claim carer’s allowance and working tax credit will lose out under the tax credit proposals. I know that my hon. Friend cares about these things, but it seems that Government Members do not.
Alex Cunningham
I am grateful to my hon. Friend for that intervention. She does tremendous work in respect of carers and I understand exactly what she is saying.
My hon. Friend will be interested in the case of my constituent Linda Harper, whose medical needs mean that she requires help and support in some areas of her life. Despite needing the unpaid care of her husband, who also has a job, Linda’s determination recently saw her battle against her condition to open her own craft store in the local town centre. Although the business does not yet turn a profit, she is succeeding in building a customer base and is contributing to the community by running classes, teaching others the skills of her craft and hosting social groups that add value to the lives of those who participate.
Linda represents the attitudes that the Conservative Government claim they want to promote. She is hard working, persevering and enterprising. Let us not forget that the Conservative manifesto at the general election promised to improve the lives of
“the millions who work hard, raise their families, care for those who need help, who do the right thing”.
Yet, when the Government’s changes come into effect, Linda estimates that she stands to lose £2,000 a year. Paying her mortgage and putting food on the table will become significantly harder and the viability of her businesses will be severely challenged.
The Government say that their demand for employers to pay people more and their tax cuts will help to restore the money that people lose from their tax credits. That is absolute nonsense. I put the following questions to the Minister. What will happen to public sector workers and self-employed people on low incomes? How can the employees of local authorities, health trusts and other public sector employers make up their income by increasing pay when the Government have said that they cannot give increases beyond 1%? How will a person who relies on tax credits and who earns less than £10,000 a year benefit from an increase in the tax threshold? How will a self-employed person with earnings of £6,000 a year give themselves a pay rise to fill the gap in their income caused by the loss of tax credits? How will a small business fulfil the Government’s promise of higher wages when it is already struggling to survive? The answers are simple: public sector workers will continue to see drastic cuts to their incomes and standard of living; self-employed individuals will be left to their own devices; and small businesses will pay people off because they cannot afford to keep them.
I am alarmed to hear that, despite the reservations of many Conservative Members, the Prime Minister and the Chancellor have no intention of halting these cuts. Perhaps the 70 or so Conservative Members whose majorities are smaller than the number of people in their constituencies who claim tax credits will have more to say about that in future. Several million people hope so.
Tax Credits
Alex Cunningham Excerpts(9 years, 2 months ago)
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Alex Cunningham (Stockton North) (Lab)
I am grateful to the Minister. He talks about an environment in which wages are rising. Wages are rising in some areas, but public sector workers have seen a tremendous reduction in their income capacity, and many of them will be affected massively by what the Government want to do. The Government need to think more about public sector workers, whose wages are not going up.
Damian Hinds
The hon. Gentleman is absolutely right to note the hard work done by public sector employees. There are pay restraints going on in the public sector—I do not deny that for a moment—but wages are growing at 2.8% in real terms this year, which is pretty broadly based across the country, while output per head is growing more in the north than the south.
Amendment of the Law
Alex Cunningham Excerpts(9 years, 8 months ago)
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Vince Cable
It depends entirely on how we look at the combination of tax and tax credit. The simple point is that the top quintile—the top 20%—has paid four times as much in deficit reduction as the group to which the right hon. Gentleman referred.
Alex Cunningham (Stockton North) (Lab)
Of course, the poorest in our society are the people who are on benefits. The Chief Secretary to the Treasury has ruled out support for the £12 billion of cuts to the welfare budget, which would make income inequality even greater for the poorest people in our society. If the Secretary of State does not support those cuts, what cuts does he support to fill the gap?
Vince Cable
Let me deal with one of the points of righteous indignation that is made about welfare cuts—the point about the so-called bedroom tax. The problem with it is that the idea of relating housing benefit to the size of accommodation did not start under this Government; it was a long-standing policy in relation to people in private rented accommodation. Where we have disagreed with our Conservative colleagues—we have made this explicit—is in saying that the so-called bedroom tax should not apply retrospectively. If people are given an offer of accommodation in the council house sector and they turn it down, they should pay it, but if they do not receive a satisfactory offer, they should not. That is a point of difference. The sheer righteous indignation bears absolutely no relation to the history of this problem.
Alex Cunningham (Stockton North) (Lab)
I worry about the poorest people in society, including the working poor, in places such as Stockton-on-Tees, because this outgoing Government have failed, even at the last opportunity, to do anything to help them. The Government have done nothing to boost their incomes or provide them with the jobs they would love to have. The Budget will bring no benefit to tens of thousands of people across Teesside, and more across the country, who hold low-paid jobs, with wages of no more than £5,000 or £6,000 a year. While the Chancellor maintains huge tax cuts for millionaires and increases tax-free allowances for people paying higher-rate tax, very few low-paid workers gain anything from changes to the tax system. These people can only dream about saving some money.
This is another Budget for the better off to be better off still and the poor to be poorer. The Chancellor even failed to deliver the promised minimum wage of £7 an hour—Labour will do much better. In his very first Budget speech, the Chancellor pledged that under his economic management the coalition Government would build
“an economy where prosperity is shared among all sections of society and all parts of the country.”—[Official Report, 22 June 2010; Vol. 512, c. 167.]
Many of the people I represent have not benefited from even the low inflation rate. Instead they have been stung by above-inflation increases in the cost of things such as energy and other utility bills. The Chancellor might be in it with his rich pals from the hedge funds who bankroll the Tory party, but I do not see much evidence on Teesside of everyone sharing in that prosperity.
Perhaps more worryingly, we have seen the repeated pattern of the poorest being hit the hardest, and nowhere are the effects of this more starkly illustrated than in the jobs market. For too long, unemployment has been higher in the north-east than anywhere else in the UK and that has been the case in every quarter since April to June 2011. Hon. Members will not be surprised to learn, then, that the claimant count in the north-east is also the highest in the country, and in my constituency the numbers are higher still. The 4.1% we have claiming support related to unemployment is more than three times higher than the rate in the south-east, and almost seven times higher than the rate in the Chancellor’s seat in Tatton.
Are Government figures an honest reflection of the numbers of people who ceased claiming this allowance? They are not. According to research by the House of Commons Library, of those who have ceased claiming jobseeker’s allowance in my constituency, only just over one third did so because they had found work. Conversely, more than half were recorded as doing it “for other reasons”. Not a single person has done so as a result of upping their hours to more than 16 a week. So, where have they gone? We know that they do not have jobs. Although a few may have gone abroad, into education, or even died, that has not happened to the hundreds of people who have disappeared from the Government’s statistics.
It is also a sad fact that too many people feel insecure and powerless at work. Record numbers of people are working fewer hours than they would like, and there is an increasing reliance on zero-hours contracts. The result is that more people worry about having enough money to pay their way. More than 5 million people are in low-paid jobs, while a quarter of a million people earn below the national minimum wage.
Meg Hillier
My hon. Friend sums up the challenges well. People may be in jobs, but what is the quality of those jobs and what prospects do they have? Does he agree that that is an issue not just in his constituency but in many other constituencies, including mine?
Alex Cunningham
Certainly, it is an issue across the entire country. I hear from people who are told at 6 o’clock in the morning that they are required for work, or, worse still, that they are not required for work. That is nonsense. What surety of income does that give them as they go into the week ahead?
The value of the national minimum wage has dropped by 5% since 2010, which is why the amount spent on in-work benefits and tax credits has risen 18%. Why cannot this outgoing Government recognise that people want to earn their money and look after their families rather than exist in a dead end, low-paid role that leaves them dependent on the state? What of those who, through no fault of their own, are dependent on the state? I fear what the Chancellor is planning to do to them next. Why is the Chancellor so coy about spelling out where the £12 billion cut in welfare spending will fall? Is it because he knows that decent people will baulk at his plans to devalue further the incomes of our most vulnerable?
Has the Minister seen the report that came overnight from Herriot-Watt university for Centrepoint, which shows that more young people will be homeless as a result of Government policies, and that many in work could lose their jobs if their housing benefit is removed and they are forced to return to live with their parents? We should not forget that this Government’s policies have seen these young people shoulder a disproportionate share of austerity and its worst effects.
Karl Turner (Kingston upon Hull East) (Lab)
Before my hon. Friend moves on, will he estimate the number of people in his constituency who are living with their parents because they are unable to buy their own home? How many of them could afford to save £200 to get the advantage of the individual savings account?
Alex Cunningham
I may not have the exact statistics, but I do know that large numbers of young people are in such a position. When I go to local colleges, I hear the anxieties of young people. They say that they want to live independent lives, go to university, and develop their plan for their own home, but they cannot do any of that.
The education maintenance allowance has been removed, support from the access to learning fund and student opportunity fund has been cut, housing benefit for under-25s has been reduced, higher education tuition fees have been trebled, and careers services have been slashed. On top of that, youth services have been hit by funding cuts of £60 million since 2012. I saw nothing in the Budget to address those issues, just a prediction of many more cuts to come.
In the north-east, 11 of the 12 councils suffered higher than average reductions in spending power for 2014-15 along with a 5% funding reduction. That is 10 times higher than cuts in the south-east, and almost four times higher in percentage terms. Our front-line emergency services are suffering more than most, too. It is no secret that A and E departments up and down the country are having a torrid time as a result of this Government’s wanton neglect of the NHS. We have £3 billion wasted on a reorganisation that has increased bureaucracy and allowed confusion to reign; fewer nurses than in 2010; and a GP work force in crisis. But much less well publicised has been the net loss of 293 officers from Cleveland police force since 2010, with more to go as the police and crime commissioner faces another 5.1% budget cut. Cleveland police are £35 million worse off than they were in 2010-11.
That picture is repeated in the fire service, with many brigades struggling to budget for the coming year while having to maintain confidence in the speed and efficiency of their emergency response services. Despite being a centre for the petrochemicals industry and posing one of the biggest fire risks in Europe, Cleveland is facing one of the biggest hits to its spending, with additional cuts this year of 10.4%.
Would the Chancellor still have the temerity to suggest that the quality of public services has gone up, not down, if he could see that services such as Cleveland are having to replace trained, full-time firefighters with retained firefighters just to make ends meet? Would he also do so if he knew that his cuts had spurred the service to close the marine fire station at the centre of our industrial complex?
Energy intensive industries form a large part of the economy on Teesside and across the north-east. The Chancellor mentioned the steel and chemical industries, but he has done little to help them. Although it was announced that the feed-in tariff element of renewable compensation for energy intensive industries will be brought forward to the point of state aid approval, renewables obligation compensation will not be introduced until 2016. That means yet another year of struggling in highly competitive global markets against international competition, which has more favourable conditions, thereby risking jobs and growth in Teesside, as companies are undercut and the jobs moved elsewhere.
With energy prices being business critical, it is possible for these industries to operate only in countries with competitive prices. If we continue in that manner, the UK will fall off the list, and it is areas such as Teesside and the north-east that will again be hit the hardest. That represents yet another missed opportunity to stimulate growth and create jobs.
With working people worse off than they were in 2010, millionaires receiving tax cuts while VAT has been bumped up to 20%, public services being decimated and front-line emergency services slashed, and at the same time that employment is insecure and those on low pay are struggling just to make ends meet, it is little wonder that people in the north-east, and indeed across the country, feel no connection at all with the two parties in government.
Andrea Leadsom
The right hon. Gentleman will realise that I have just quoted Paul Johnson of the IFS. I stand by what the IFS has said, which is that, from 2010 to 2015, the average household is £900 better off.
My right hon. Friend the Member for Boston and Skegness (Mark Simmonds) welcomed the fall in unemployment, the many who have been taken out of tax, and the fuel duty freeze, which has been great for his constituents. My hon. Friend the Member for Dudley South (Chris Kelly) spoke about the fact that Dudley is full of hard-working people, and said how our support for businesses has helped them. He will certainly be missed in this place.
The hon. Member for Luton North (Kelvin Hopkins) criticised many of the coalition’s cuts but did not say how he would sort out the huge financial mess left by the Labour party in 2010. My hon. Friend the Member for North Warwickshire (Dan Byles) gave impressive figures for improvements in his constituency, not just to the local economy but also to local public services. As he pointed out, a strong economy means that we can pay for excellent public services. I wish him every success in his career when he leaves this place.
The hon. Member for Clwyd South (Susan Elan Jones) welcomed the increase in personal allowances and the rise in gift aid for charity cash collections. I join her in congratulating Giggles and Games in her constituency on its prize for a thriving business. My hon. Friend the Member for South Norfolk (Mr Bacon) raised the important issue of housing. He welcomed the Budget creating 20 housing zones, and made important suggestions about the need to improve housing supply, including through self-build. The hon. Member for Hackney South and Shoreditch (Meg Hillier) talked about problems of poverty in her constituency, but acknowledged that the route out of poverty is work. She should welcome the fact that the total claimant count in her constituency is down by 39% since 2010. She also raised the issue of real-time data for credit reference agencies. The FCA is continuing to focus on achieving real-time data sharing, and significant progress is being made.
My hon. Friend the Member for Brentford and Isleworth (Mary Macleod) pointed out the economic benefits to her constituency of regeneration and making work pay, as well as the business rate reliefs for her high street and support for the creative industries. She highlights the urgent need for faster broadband and more new housing, and I agree with her about that. The hon. Member for Stockton North (Alex Cunningham) challenged the quality of the jobs available, so I am sure he will be pleased to know that since Q1 2010, more than 70% of the increase in employment has come from full-time workers, two thirds of whom have been in high-skilled occupations, and that the claimant count in his constituency is down by 25% since May 2010.
Alex Cunningham
I welcome any jobs that are created in my constituency, but the statistics I referred to showed that hundreds of people have disappeared from the jobseeker’s allowance lists. Nobody knows where they have gone and whether they have died, left the country or something else. Is there any explanation for where those hundreds of people missing from the JSA lists have gone?
Andrea Leadsom
That is an extremely interesting question and the hon. Gentleman may well want to follow it up as the representative for his constituency. It is not something that I can answer at the Dispatch Box.
My hon. Friend the Member for Ealing Central and Acton (Angie Bray) welcomed the review of business rates and pointed out their importance, particularly for businesses in her constituency that are competing with online companies. She also pointed out the need for urgent action on superfast broadband for business, and welcomed the measures in the Budget.
The hon. Member for Birmingham, Selly Oak (Steve McCabe) welcomed the penny off a pint and the freeze in fuel duty, but said that the Chancellor ignored the NHS. In truth, the Government have chosen to protect the NHS through this tough period and have now committed to much greater support for mentally ill people. I would dearly love to hear the Opposition just once welcome this vital investment, which will do so much to help people struggling with poor mental health, rather than just ignoring it. My hon. Friend the Member for Northampton South (Mr Binley) told us about the choices that his grandmother gave us all—either earn more or spend less when in difficulty—and I am delighted to hear she would have been pleased with the Budget. I congratulate him on his long-standing support for small and medium-sized businesses and put on the record how much I have enjoyed being his constituency neighbour in the lovely country of Northamptonshire.
The hon. Member for Angus (Mr Weir) talked about the problem of the last bank in town, which I am very sympathetic to, but he might be reassured to know that I have held round tables, including with the Secretary of State for Business, Innovation and Skills, talking to banks about the need for smart ATMs that take in, as well as give out, cash and discussing improvements to post offices, including longer hours and upgrading security at counters for business banking, and we hope there will be a protocol for bank closures in the future. I am happy to talk to him separately about the matter. My hon. Friend the Member for North Dorset (Mr Walter), in his encore speech as a retiring Member, warmly supported the Budget and gave a considered assessment of the measures in it. It was an excellent swansong, and I wish him a successful and peaceful retirement.
Fiscal Responsibility and Fairness
Alex Cunningham Excerpts(9 years, 8 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Danny Alexander
I thank my hon. Friend for her consistent support for the rural fuel discount scheme. She was one of the Conservative Members who spoke up for this in the last Parliament, as well as in this one, and she makes the right argument. I am delighted that we are the first country in the EU to put in place a rural fuel discount scheme for remote mainland communities, and I hope in due course it will be possible to extend it—so I do not wish her constituents to think that the hope of its being extended to them is extinguished.
Alex Cunningham (Stockton North) (Lab)
The right hon. Gentleman has tried to give a very different impression today, but if he is still “all in it together” with the Chancellor, will he do what his boss has refused to do and tell us where the £12 billion of cuts to the welfare budget will fall?
Danny Alexander
It might have escaped the hon. Gentleman’s knowledge, but his Front-Bench team signed up to the revised charter for fiscal responsibility, which requires £30 billion of further deficit reduction. I can reassure him that I do not support the Conservative policy of £12 billion of welfare cuts in the next Parliament, but no doubt that matter will be debated in the election campaign. I believe Labour claims it has some plans for reducing welfare expenditure, though, as on everything else, it has not set out any detail.
Childcare Payments Bill
Alex Cunningham Excerpts(10 years ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Alex Cunningham (Stockton North) (Lab)
I rise to support new clause 1 and specifically to speak to amendments 1 and 2, which are aimed at getting a fairer deal for parents with disabled children by respectively rethinking how we identify qualifying children to expand the definition beyond that planned by the Government, aligning it with the prescriptions of the Childcare Act 2006, and increasing the amount of top-up payment available to support parents of disabled children.
The provisions in clause 14 relate to “qualifying children” and lay out the criteria that such children must meet to be eligible for the scheme. Clause 14 is therefore fundamental to the entire Bill, so it is of the utmost importance that we get its provisions right. Failure to do so risks undermining the entire scheme.
After this amendment was brought forward in Committee, I understand that the Government’s intention was to frame regulations such that a “qualifying child” is defined as one aged under 12 or, in the case of a disabled child, under 17. I do not need to recap fully on the reasoning I set out in Committee; suffice it to say, as I mentioned at the time, that the stated definition of a disabled child does not fit easily with section 6 of the Childcare Act 2006, which places a duty on local authorities to provide sufficient child care for working parents with disabled children aged up to 18 “as far as practicable”.
The Exchequer Secretary objected to raising the age of eligibility for disabled children to 18 on the grounds that the age limit was set in line with the child care element of universal credit. However, it is important to recognise that the regulations on the child care element of universal credit reflect a maximum age that was set more than a decade ago when the child care element of working tax credit was established. Put simply, markedly less evidence was available on how families use child care, and our understanding has improved greatly since.
The Childcare Act 2006, however, was designed to take into account the evidence of child care needs in families with disabled children, which in many cases remain significant up to 18 and beyond. It therefore makes sense to adopt the maximum age set by the Childcare Act, which set a higher age because it was based on a comprehensive review of the available evidence, rather than revert back to an historical maximum age that no longer reflects our best understanding of families’ child care needs.
Through the tax-free child care scheme, the Government are committing significant new resources to support parents with child care costs. This will come at a cost of more than £800 million each year, and my hon. Friend the Member for Newcastle upon Tyne North (Catherine McKinnell) made it very clear that we welcome that. There must be some scope to ensure that a balance exists between supporting all parents and those who face significant additional costs.
The additional costs of raising a disabled child are well documented, and the Minister herself noted in Committee that she was “conscious” of these additional child care costs that families with disabled children might have to meet. I need not go into any great detail, but these can include such things as extra nappies or continence supplies, specially designed shoes, IT adaptations and communication aids, as well as specially adapted toys or equipment. That is on top of the day-to-day premium that is paid already in the shape of higher travel and activity costs, and the like.
Maria Miller (Basingstoke) (Con)
I understand what the hon. Gentleman is saying, because it accords with my experience in my constituency, but does he not think that local authorities have an obligation to ensure that there is sufficient care for disabled children? KIDS nursery in my constituency is a specialist nursery for disabled children. Should not local authorities be thinking about providing such services as well?
Alex Cunningham
I have been fighting the ending of specialist nursing provision at my local hospital, because it meets the specific needs of parents of disabled children. There has been a considerable reduction in the amount of money that enables local authorities to meet the demand for essential services—if they were given more means, they might well be able to expand provision—but I agree with the right hon. Lady that someone should take responsibility, and I think that my amendment goes some way towards ensuring that that happens.
In Committee, the Minister said:
“It is right that we make the new scheme consistent with the current framework.”––[Official Report, Child care Payments Public Bill Committee, 23 October 2014; c. 192.]
I urge her to reconsider her decision not to increase support for parents of disabled children. She can help today by increasing the maximum age at which disabled children become eligible for the tax-free child care scheme—and, in future, for the child care element of universal credit —to 18, to align the scheme with the prescriptions of the Childcare Act sufficiency duty, and to give the families of disabled children the support that they need and deserve.
At the same time, the Government should aim to establish a framework that would include all children with disabilities in child care in order to fulfil the basic principles of equality and inclusion. Equitable access to affordable, flexible, high-quality child care would be hugely valuable to children’s social and educational development, not to mention parents’ well-being and long-term economic prospects. In its present form, however, the tax-free child care scheme will not effectively remove the additional affordability barriers from parents with disabled children. To address that inequality, the Government should provide the additional top-up payments for disabled children through the tax-free child care scheme that amendment 2 would provide. I hope that the Minister will consider that proposal.
The Exchequer Secretary to the Treasury (Priti Patel)
It gives me great pleasure to speak in the debate. Let me begin by thanking everyone who contributed to the Committee stage, engaging in constructive dialogue, submitting the Bill to line-by-line scrutiny, sharing their views and giving evidence. I think that all Members found the evidence sessions extremely helpful. Opposition Members tabled a number of well-considered probing amendments that were designed to seek clarification throughout—
Priti Patel
I thank my right hon. Friend for her intervention and comments. She is absolutely right; as she will know from discussions in Committee, this scheme has been designed to be parent-focused—parent-friendly is, I think, the term to use—and to work with employers, because this is about engaging both parties to communicate, educate and inform. Employers have an important role to play—we must not forget that—so working with employers on the scheme design is key.
The introduction of this new scheme sits alongside strong early-education entitlement for pre-schoolers to support families and hard-pressed families with their child care costs and support parents to work more if they want to do so.
As I said in Committee and we have touched on again today, we have already committed to reviewing the impact of this new scheme after two years, and it is hard to see what purpose would be served by a review only three months after Royal Assent, given the Government’s clear commitment to reviewing the scheme.
I shall now move on to the points made about amendments 2 and 1 and the comments of the hon. Member for Stockton North (Alex Cunningham). I welcome his comments and I followed his remarks with interest, and we discussed these matters in Committee. We fully accept that child care costs are higher for parents with disabled children; there is no disagreement here at all. The families and parents of disabled children struggle with the challenges of raising and looking after their children. We had a very fluid debate about this in Committee.
The effect of amendment 2 is straightforward. It would increase the level at which the Government top-up payments are paid to parents of disabled children from 20% to 40%. This would mean in practice that for every £10 spent on child care, the Government would contribute £4 and the parent the remaining £6. This contrasts with the position set out in the Bill, which is that the Government would contribute £2 of every £10 spent on child care.
I am very well aware of the keen interest the hon. Gentleman takes in families with disabled children. He spoke with great eloquence in Committee and I thank him for his contribution on this point. As he rightly pointed out, families with disabled children face significant costs, and that fact ought to be reflected in the scheme. A number of witnesses who gave evidence to the Committee made similar points. I have already put on the record that I fully understand the arguments the hon. Gentleman and others have made and it is absolutely right that parents of disabled children are properly supported, which brings me to why I will ask him not to press his amendments.
Alex Cunningham
I thank the Minister for her kind comments, but the multiplication that I want to achieve for disabled children does not even reflect the multiplication factor in their child care costs. Child care can cost £20 an hour, but all I am asking is that the Government double the amount of support they give. I am not asking them to increase it by four or five times.
Priti Patel
I thank the hon. Gentleman for his comment. I outlined measures relating to disabled children in Committee. We recognise the high costs faced by parents of disabled children, and the specialist care that their children need, but increasing the amount of top-up is obviously not appropriate, for the reasons that I have already outlined. I have made a commitment on disabled children, and I am exploring the possibility of increasing the maximum amount that a parent of a disabled child can pay into their child care account. For those reasons, I ask the Opposition to withdraw their new clause.
Alison McGovern
It is important for all of us to recognise the extra pressures on families in rural areas. People’s circumstances are different. We want to increase employment in rural areas as well as in suburban and urban areas. The hon. Gentleman makes an important point.
Alex Cunningham
My hon. Friend helps me to talk about the needs of parents with disabled children. When inflation and prices go up, the increase is felt particularly acutely by those families. Does she agree that the Government really need to think again about that particular element?
Alison McGovern
Again, I support the views of my hon. Friend. Too often, parents of children with disabilities are forgotten in our debates. They have the most important responsibility. Children with disabilities deserve all our care and attention. I hope that, by raising this matter, we can remind ourselves that their parents might not have the time to make these points, so it is important that we all remember the extra costs and the circumstances that those parents face. We all have an interest in this matter. It is why Labour is sceptical about the wisdom of a demand-side-only approach.
In general, better value for money and better outcomes could be achieved through a radical expansion of the free child care entitlement to three and four-year-olds, from 15 hours a week to 25, paid for by an extension of the bank levy. There is no better week than this to be making the argument about extending the bank levy, as once again we are seeing banks being taken to task for their poor behaviour. I make no apology for reminding Members about the importance of that bank levy, especially as it could pay for something as vital as child care.
As we saw from the debate on new clause 1, the Government are not about to accept the policy—more fool them—but we want to ensure that Ministers are required to keep track of the inflationary impacts. New clause 2 requires that within three months of the Bill’s becoming an Act and every three years subsequently, the Chancellor will have to review the impact of the subsidy on making child care more affordable, on what the average cost of child care for parents in work is and on whether supply-led measures could be more effective. That is not a massively onerous burden on the immense capabilities of the Treasury, but a very valuable canary in the coal mine regarding child care inflation.
In Committee, the Minister was consistently against any suggestion of hourly rate capping or other means of placing a brake on any inflationary pressures arising from the policy. A regular review might demonstrate whether the post hoc implementation of such provisions might in fact be necessary if the subsidy is to be anything more than a damp squib.
The Bill is a blunt instrument that fails to target Government funding and gives the most financial support to the best-off families. It will possibly provide some short-term relief for parents, but does little to deal with the underlying problems of inflation, supply and quality in the child care system. There are 40,000 fewer child care places in England than there were when the Government came to power and almost 4,000 fewer suppliers. Childminder numbers are down by 13%. For tens and likely hundreds of thousands of families across the country, the proposals in the Bill will mean little or nothing because they simply cannot find a child care place or access one that will offer the flexibility in hours to fit around work. We need radical reform of the broken child care market. This Bill does not provide it, but by supporting new clause 2 today Members can at least take a step that will help guard against its being a worse than a useless creator of child care cost inflation.
Alex Cunningham
My hon. Friend the hon. Member for Newcastle upon Tyne North (Catherine McKinnell) has already talked about the complexity of the Government’s scheme. Amendments 12, 13 and 3 to 11 are all aimed at simplifying the relationship and interaction between the tax-free child care scheme and other sources of support, particularly tax credits and universal credit.
Members might be aware that I tabled amendments 3 to 11 in Committee with the intention of broadening the provisions of the Bill and allowing those households in receipt of tax credits that do not receive any support for their child care costs in their tax credit award to receive support from the tax-free child care scheme. My hon. Friend the Member for Wirral South (Alison McGovern) has already outlined that the working poor have been hit most by the policies of this Government and I would like that not to apply to child care.
Giving those people help will entail several minor changes being made to the clauses dealing with the special rules affecting tax credits and universal credit claimants: specifically clauses 30, 32, 35 and 36. In Committee, the Minister was very clear about the need to deliver a welfare system that is
“designed to encourage progression into work”.––[Official Report, Childcare Payments Public Bill Committee, 23 October 2014; c. 223.]
However, that is not what will result from the Bill in its current form.
Let us take as an example a parent who is offered 15 hours of work a week on a low rate of pay. Most, if not all, of any gains from this employment could be totally lost in child care costs. They would not get any support from the Government to meet those costs and might therefore not be able to afford to take the work in the first place, and I for one would not be surprised if they chose to spend the time with their children instead. These amendments, however, would create a much greater financial incentive for people to start working part time.
It is important to be clear from the outset that the purpose of the tax-free child care scheme is to provide support for child care costs for those who are not eligible for help from elsewhere. As I mentioned when I raised the matter in Committee, there is an anomaly in the Bill if we are serious about encouraging people to go back into work or to stay in work—particularly those who are on the lowest earned incomes in our society.
The Bill as it stands says that the Minister recognises that there are some who do not get any help through tax credits but that the Government will do nothing to help. I am sure that that is not what she intends. Indeed, in Committee, she specified that the new scheme should not interfere with financial incentives for people to work more hours, let alone create perverse incentives, but that is precisely what the Bill will do.
Many parents who claim tax credits are both working and incurring child care costs, but they are not entitled to claim the child care element because, for instance, they do not meet the minimum number of working hours per week to qualify. Clause 30, however, makes it clear that any tax credit award will be terminated when a valid claim for the tax-free child care scheme is made, regardless of whether the child care element of working tax credit is received. Put into context, that means that households in which one parent is working full-time while the other works 12 hours a week will not be entitled to receive the child care element of tax credits to support them in the payment of child care costs. Similarly, single parents working 15 hours or fewer per week on average will also not be entitled to the child care element of working tax credit. Both would have to pay for their child care out of their own, potentially low, earnings.
Hywel Williams
I very much agree with the thrust of the hon. Gentleman’s argument. His point applies particularly to people in seasonal industries such as agriculture or, as in my constituency, tourism. I am sure that he agrees that there is a particular problem for those sorts of workers.
Alex Cunningham
Yes. I am grateful to the hon. Gentleman for that intervention. I most certainly do agree with him. Pieceworkers and others can have hours and wages that fluctuate over a long period; they will most certainly be affected. I feel that the
“easy-to-use online tool”––[Official Report, Childcare Payments Public Bill Committee, 23 October 2014; c. 222.]
promised by the Minister in Committee will prove elusive.
On top of the sizeable potential for confusion, the different mechanisms by which child care costs are to be paid under the tax-free child care scheme and universal credit are also worrying. As we are aware, under the tax-free scheme, payments will be made through child care accounts. That will provide families who are in receipt of tax-free child care with an important budgeting tool to help them manage their finances; that is particularly important as payments will be made through child care account top-ups before costs are paid by the parent. However, child care support received through tax credits and universal credit cannot be provided through child care accounts. That means that child care payments are not aligned, which gives rise to the potential for further confusion and complexity for parents, and it means that an important budgeting tool for households in receipt of tax-free child care is not available to those receiving child care support through universal credit.
It is worth highlighting that the Children’s Society report “The Debt Trap” found households in poverty containing dependent children to be twice as likely to be in some form of arrears as families on higher incomes. It is precisely these families who are most likely to need help with budgeting, but who will be given the least support. Moreover, universal credit payments of child care costs will be made in arrears. As Members will be aware, parents are usually required to pay child care providers one month in advance, but families on low incomes claiming universal credit are likely to have the lowest savings, if any at all; this will inevitably result in many being forced to borrow money to pay for their child care up front. We should be under no illusion: that could be a hefty sum, and if child care costs are higher during school holidays, further loans may be required to meet those costs. This runs the obvious risk of forging a cycle of dependence. Reporting requirements for universal credit are significantly greater than those for either tax credits or tax-free child care, and any failure to report in time will lead to the loss of all payments for that assessment period.
Mark Durkan (Foyle) (SDLP)
Does the hon. Gentleman not think it strange that in this time of austerity and everything else that we hear about, the Government have come forward, under this Bill, with a child care payment scheme that gives more, including more flexibility, to those who have more? I am thinking of the bankable allowances and so on. Compare that with what the Government are providing, in terms of child care, under the universal credit rules. It really is one scheme for the better-off, and another, much worse scheme for the less well-off.
Alex Cunningham
I most certainly do agree with my hon. Friend. It is a peculiar world—I would use the word “bonkers”—when someone earning £100,000 can benefit more from a new Government scheme than somebody on perhaps £20,000. It is important that the Government think again on some of these points.
Let us not forget that families on higher incomes will get their child care accounts topped up by the Government before they have to pay their provider, so the rich get paid up front, while the poor do not get any payment at all. One possible solution that could be explored further is the provision of child care accounts and tax-free child care to families in receipt of child care support through tax credits or universal credit. Allowing these claimants to use child care accounts to receive their payments of child care costs would allow receipt in advance of payment, but without the risk of any overpayments being lost within wider family budgets. However, as things stand, the Bill would not permit that without additional primary legislation. These minor amendments to clauses 11 and 15 would allow the tax-free child care scheme to go forward as designed, while allowing us the time to consult and to assess these issues fully. We would have the flexibility to make changes by regulation, rather than through additional primary legislation.
Universal credit is still in its infancy and is being gradually rolled out. It seems to make little sense to limit how it may evolve by putting barriers, in the form of primary legislation, in the way of what may be sensible reforms. I would like to hear from the Minister what further considerations she has given to extending the tax-free child care scheme in this way, and expanding child care accounts beyond the scheme. I hope that she will support these minor amendments, which would allow for the potential benefits that those changes could deliver, particularly for some of the poorest people in our society.
Priti Patel
I welcome the hon. Member for Wirral South (Alison McGovern) to her position and post. It is good to hear from her. Obviously, she did not have the full benefit of participating in the Committee, so it is good to hear her views today.
New clause 2 is about the Bill’s impact on child care costs, an issue that we discussed at some length in Committee. The new clause would require the Government to publish a review of the Bill’s impact on the cost of child care three months after it passed into law, and every three years thereafter. The review would have a particular focus on the effectiveness of the Act in making child care more affordable, the average cost of child care for working parents, and the impact of supply-led measures on costs.
As I have said many times in debates on this Bill, the Government have made a clear commitment to review the impact of the scheme two years after full implementation. That was set out in the impact assessment published alongside the Bill. The Government feel that a two-year assessment period is reasonable and will allow sufficient time for the scheme to become bedded in, so that the full impacts can be assessed and properly evaluated in the context of wider Government policy. We do not think that there is anything to be gained from adding a further review after only three months.
I think that all hon. and right hon. Members are rightly concerned about the impact that high child care costs have on working parents. We understand the cost of child care, and the Government are committed to supporting parents to meet that cost; that is the purpose of the Bill.
Priti Patel
I thank my hon. Friend for his comment. Naturally, we want to get this right, so there is oversight at every level. Later in my remarks, I shall touch on areas where his remarks are valid and pertinent.
We know that child care is an expensive outgoing for many families across the country. This Government understand the need for both demand and supply-led measures to ensure that the costs of child care do not spiral out of control. We have been taking steps to ensure that both sides of the problem are properly considered. The Government believe that increasing supply is an effective way of limiting further price rises, and are therefore making significant reforms to support the child care sector in increasing the supply of places.
The Government are taking actions beyond the scope of the Bill to improve the quality and supply of child care provision. These reforms are designed to ensure that any increase in demand for child care arising from the new scheme will be matched by increased supply and not by increased costs. The latest figures show that there are about 100,000 more child care places than in 2009, and the Government are taking action to grow the supply of child care still further, which will improve choice and affordability for parents. For example, we are making start-up grants of up to £2 million available to help people set up new child care businesses. We are also enabling good and outstanding childminders to access funding for early education places. Only 4,000 do so currently, but as a result of our reforms, up to 32,000 will be automatically eligible. We are making it simpler and easier for schools and child care providers to work together to increase the amount of child care available on school sites, and only this year we have introduced childminder agencies, which are designed to improve the support available for both childminders and parents, and to simplify existing regulatory frameworks to allow nurseries to expand more easily.
We recognise that child care costs place a significant financial burden on many families, but research shows that after 12 years of consistently rising prices, the costs of child care in England have stabilised for the first time. There is encouraging evidence that costs of some of the most popular types of child care are falling in England. For example, the Family and Childcare Trust reported in March that the cost of nurseries in 2014 was 2% lower than in the previous year in real terms. Similarly, the cost of after-school clubs reduced by 5% in real terms during the same period. Once inflation is taken into account, costs for the majority of parents have fallen. This means that more parents are able to access affordable child care and support their families, and shows that the Government’s reforms are making a difference. We should compare that with the situation under Labour, when costs rose nearly 50% between 2002 and 2010, and the average cost of child care rose faster than inflation.
Alongside these measures to increase the provision of good quality, affordable child care, the Government have taken significant steps to support families in meeting their child care costs.
Alex Cunningham
I welcome the fact that more families may well be able to access child care because of falling costs, but the costs are still high and they are paid by the poor as well as the rich. Will the Minister please outline what she will do for the working poor who do not qualify for anything under any of her schemes?
Priti Patel
I will come on to the hon. Gentleman’s amendments and refer specifically to the points he makes.
For low earners, the Government will continue to pay up to 70% of child care costs through working tax credit, and under universal credit this support will be extended to up to 85% of costs when both parents are working, as all hon. Members heard in Committee. In addition, as we have touched on, the Government fund an early years entitlement of £15 a week.
The Government are making good progress in tackling the root causes of child poverty, to which the hon. Member for Wirral South referred. All Governments are committed to ending child poverty once and for all, but I reiterate that work remains the best route out of poverty. We discussed this at length in Committee, including the interactions between universal credit, making work pay, and interdepartmental measures on child poverty.
Priti Patel
We had much debate in Committee on universal credit and the way in which the scheme interacts with it. The hon. Member for Manchester Central (Lucy Powell) made some strong and valid contributions in this regard.
Amendment 12, tabled by the hon. Member for Stockton North (Alex Cunningham), would allow regulations in future to permit parents to receive support under the new scheme and universal credit at the same time. As I have said, we must not forget that families in receipt of universal credit already rightly receive generous support with their child care costs. Child care support is offered to parents on universal credit as part of a welfare system designed to make sure that work pays and that those who need the support get it. Up to 300,000 more people are likely to be in work as a result of universal credit, and we expect a significant proportion of those to be households with children. But it is not right for a parent to receive support under the new scheme in addition to universal credit, when parents will receive 85% of their child care costs from April 2016. It will be easy for parents to access support that best suits their circumstances, so I reassure the hon. Gentleman that parents who are eligible for universal credit will be able to opt out and claim support under the new scheme should they wish to do so. We shall be supporting parents in making those decisions.
As we said in Committee—hon. Members have touched on it again today—we shall be launching the online support tools, the calculator and clear guidance. Draft guidance has been published well ahead of the launch of the scheme and shows our commitment to work in close collaboration with parents, child care providers and employers, and their feedback will ensure that guidance is tailored to meet their needs.
This is about ensuring that support remains focused on those on lower incomes, and the introduction of the scheme gives parents confidence that as they increase their income and move off universal credit, they will continue to receive Government support with their child care costs, which is vital.
Alex Cunningham
I do not want to go over the top on this, but will the Minister please outline what help she proposes for families who do not qualify for anything at the moment but who are still the working poor?
Priti Patel
There is support that remains focused on those on lower incomes. As I said at length in Committee, the Government’s overall child care system is very much focused on those on lower incomes, and it is wrong to suggest that that is not the case. Families in receipt of tax credits receive more generous support with child care costs. We have already discussed universal credit, which is being extended to cover up to 85% of the costs of child care. All the analysis shows that the benefits of the scheme are focused on households on lower incomes. The new scheme ensures that for the first time parents can be certain that support will be available for them; yes, obviously, at the lower end, but importantly, as they move into work and increase their incomes too. The scheme is much more fairly targeted than the existing scheme of employer-supported child care. It supports working families, getting households and families back into work. It was debated at length in Committee, and I reassure the hon. Gentleman that that is the case.
Today’s debate has shown that the Government are taking a broad range of actions to support families with the costs of child care, not just through this scheme, but through improvements in the welfare scheme—
Priti Patel
I take this opportunity to re-emphasise that the scheme in no way creates confusion. In Committee we touched briefly on the situation in Northern Ireland and provided information and guidance in that regard. This is about working with all the players—parents, employers, and other stakeholders. It is about making the system abundantly clear and simple, not about complexity. Guidance has been drafted. We are working with third parties. We are designing a calculator tool, as we have discussed before. This is all about giving guidance and providing clarity.
I shall briefly cover amendments 3 to 11 on families in receipt of tax credits. The child care element of tax credits is just one component of the package of support designed to help lower-income households. I emphasise that there is support for those on low incomes, in particular. We should reflect on the fact that under the new scheme more working families than ever before will be eligible for support with child care costs. The scheme will be an important component of the overall offer to working families. It will sit alongside existing schemes to ensure that support is available to those increasing their incomes as they move off benefits.
Alex Cunningham
Does the Minister not see any advantage in leaving the door open by amending the Bill to allow for the scheme to be extended at a later stage? As I said in my speech, it will take primary legislation to extend the scheme any further, whereas she could accept an amendment that would mean that the door was open to simple, straightforward regulation instead.
Priti Patel
I commend the hon. Gentleman for his tenacity in making that point again, as is absolutely right and proper. I reiterate that the Government are committed to reviewing the scheme, as I have outlined previously in Committee and during today’s debates on new clauses 1 and 2. It has to be right and proper to have that review. Once the scheme has bedded down and we have had the full assessment and evaluation, we will look at all its aspects. I hope that I have given the hon. Gentleman sufficient reassurance. I ask him to withdraw his amendment and Labour Front Benchers to withdraw their new clause.
Question put, That the clause be read a Second time:—
Priti Patel
I beg to move, That the Bill be now read the Third time.
The Bill has been many months in development through consultation, drafting and detailed discussion in Parliament, and I am sure the House will agree that it will leave the Commons in good shape.
Before I proceed, I would like to pay tribute to my right hon. Friend the Secretary of State for Education who, as Financial Secretary, was responsible for some of the key features of the scheme and introduced the Bill in the House of Commons in June. I spoke on Second Reading as a Back Bencher, and it is an honour for me to appear today as the Minister responsible for the Bill.
I welcome this further opportunity to speak on the Bill and to reflect on the important role it will play in the Government’s broader strategy to get people into work. One of our fundamental principles has been that every person who can stand on their own two feet should do so. That means being in work, making their contribution and taking responsibility. We want to empower people in their choices. As a mother myself, I strongly believe that child care costs should not be a barrier to work. Since 2010 we have introduced a comprehensive package of measures to help working families cover nursery costs for their children. The new child care scheme will greatly expand the support we provide to working families towards their child care costs.
Even before the financial crisis, there were around 5 million people in the United Kingdom of working age on out-of-work benefits, some 1.4 million of whom have spent the past decade unemployed. The number of households where no one had ever worked almost doubled between 1997 and 2010, so when we took office in 2010 we made getting people back into work one of our key priorities. We can be proud of some major successes. Figures from the Office for National Statistics have shown that unemployment fell by 154,000 to below 1.97 million in the three months to the end of August, the first time it has been below 2 million since 2008. Since 2010, the UK has created over 2 million more jobs for people to go to—the fastest rate of job creation of any major economy, or, as the Financial Times put it in September, more jobs than the rest of the European Union combined. Female participation in the work force is at an all-time high, and we should welcome that.
As ever, there is more that can be done. If we had the same levels of men and women participating in the labour market, the OECD says that could lead to an increase in GDP of around 10% by 2030. Survey data from the Department for Education suggest that more than half of mothers would prefer to be in paid employment if they could arrange reliable, convenient, affordable, good quality child care. The Government are therefore taking action to ensure that high-quality child care is available and affordable. We recognise that child care costs are a major part of most working families’ budgets so we are putting in place measures to help every working family in the UK with their child care costs.
We have almost doubled the amount of child care support available to most middle earners, and we are doing even more for those on low pay. We are already funding 15 hours a week of free child care for every three and four-year-old, funding 15 hours a week of free child care for 40% of two-year-olds, and increasing the child care support for low income families to 85% under universal credit. Now, this scheme will significantly broaden access to child care support. Hundreds of thousands of families who are excluded from the current employer-supported child care scheme will be able to benefit from the scheme, and up to 200,000 self-employed parents will have access to child care support.
We have paid particular attention to designing the scheme so that it suits the needs of part-time workers. Parents earning as little as £52 per week—averaged over a quarterly entitlement period, or over a tax year for self-employed parents—will qualify for support.
We do not believe, however, that providing direct support to parents is the only way to address the high cost of child care. That is best achieved by supporting the child care sector to increase supply, which will ensure that any increase in demand for child care will be matched by increased supply measures, rather than just increased costs.
The latest figures show there are now 100,000 more child care places than there were in 2009. We are making start-up grants available to help people set up new child care businesses. We have made up to 32,000 good and outstanding childminders automatically eligible for early education funding. We are making it simpler and easier for schools and child care providers to work together to increase the amount of child care available on school sites before and after school. Only this year, we have created childminder agencies, which will improve the support available both for childminders and for parents, and simplified existing regulatory frameworks to allow nurseries to expand more easily.
The evidence shows that our reforms are having an effect. After 12 years of consistently rising prices, the costs of child care in England have stabilised for the first time. Indeed, the costs of some of the most popular types of child care in England are now falling. Once inflation is taken into account, costs for the majority of parents have actually fallen, which means that more parents are able to access affordable child care and support their families. By contrast, the costs of some types of care have risen in Scotland and Wales, where these reforms do not apply.
As we have discussed in previous debates on the Bill, child care costs are not the only pressure on family budgets. We can never forget the impact of the 2008 recession and its effect on incomes for every household.
Alex Cunningham
I welcome the fact that prices are coming down and that more places are available, but the vast majority of the new jobs to which the Exchequer Secretary has referred are low-paid, part-time, insecure and involve zero-hours contracts and similar, which do not make anybody’s life easier as they consider care for their children. Perhaps that is why we are seeing an overspend of many billions of pounds in the Government’s social security budget.
Priti Patel
I re-emphasise a point I have made consistently throughout the passage of the Bill: the Government’s overall system of child care remains focused on those who are on lower incomes. We are concentrating on supporting families getting into work and ensuring, as we have touched on in previous debates, not only that work pays, but that child care support remains focused on those on lower incomes.
Living standards—the cash in people’s pockets and what they can buy with it—are perhaps the biggest issue facing British families. The tough decisions we have taken as a Government have a very clear end in mind, which is to help create prosperity and boost living standards. Alongside that, we want to make sure that the Government have the right measures to support working families and households and to ensure that work pays.
Since coming to power, this Government have taken decisive action to ease the pressure on households and families. We are providing free school meals for all infant school pupils in reception year and in years 1 and 2. We have increased the personal allowance to £10,000 and in April 2015 it will increase to £10,500. During the course of this Parliament, we have cut the income tax of the typical taxpayer by £805, taking more than 3.2 million individuals out of income tax by 2015-16 and boosting the take-home pay of 25 million people.
Additional measures on living standards include freezing council tax in real terms and cutting the cost of driving by freezing fuel duty until the end of this Parliament, saving a typical motorist £680. We recently announced that the cost of driving licences will also be cut. Ultimately, however, as every family knows, the best way to raise living standards is by being in work, and we are pulling out all the stops to help those who want to work get into work by making work pay and introducing this Bill, which provides important financial measures to support child care.
I thank all Members for the opportunity to debate all the issues associated with child poverty as the Bill has passed through the House. Child poverty is an extremely important issue and this Government are fully committed to the goal of ending child poverty in the UK by the end of 2020.
Energy-intensive Industries
Alex Cunningham Excerpts(10 years, 2 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Alex Cunningham (Stockton North) (Lab)
I beg to move,
That this House welcomes the measures announced in the 2014 Budget Statement which reduce cost pressures created by the imposition of carbon taxes and levies; notes that without such measures, there is a serious risk of carbon leakage; further notes, however, that UK manufacturing still pays four times as much for carbon compared with main EU competitors because of taxes such as the carbon floor price; and calls on the Government to build on the measures announced in the Budget by producing a strategy for energy-intensive industries, as recommended by the Environmental Audit Committee in its Sixth Report of Session 2012–13, HC 669, in order to produce a fairer and more efficient system which delivers genuine potential for investment in a low-carbon economy.
I am delighted to have the opportunity today to open this debate and to move the motion in my name and that of the hon. Member for Redcar (Ian Swales). I am grateful to the Backbench Business Committee for granting time in the Chamber for this important debate about the impact of taxation on our country’s energy-intensive industries, which employ or support up to half a million jobs.
I know that other hon. Members, many of whom have energy-intensive industries in their constituencies, would have liked to be here today to contribute to this debate, but have rightly chosen to travel to my homeland to chat to my fellow Scots who have yet to make a final decision on whether or not to vote to keep the United Kingdom together. Just as I am sure they are here with us in spirit, I am sure that most, if not all of us, recognise and support their mission, which will have a direct impact on the issues that we are discussing today.
Before I get into the main body of my speech, I formally declare my membership of the all-party parliamentary group for energy-intensive industries, which campaigns on the issues to be raised today and whose members helped to secure this debate. Much of the debate will centre on the impact that carbon taxes and levies are having on our energy-intensive industries—EIIs—and will seek to encourage progress in working towards a strategy for EIIs that will deliver genuine potential for investment in a low-carbon economy.
Whether it be through petrochemicals, nitrate fertiliser or steel production, the Tees valley, where my Stockton North constituency sits, has long been synonymous with heavy industry and the thirst for energy that it necessarily entails. The town of Billingham, which is home to a large chemical centre, has played a particularly significant role in Britain’s industrial back story. The cooling towers and chimney stacks that still adorn, if not dominate, parts of the region’s skyline—along with the famed transporter bridge—are testimony to Teesside’s proud industrial heritage, but the decline of those industries will be hastened if actions are not taken to lessen the burdens imposed by carbon taxes and levies.
As Member of Parliament for Stockton North, I shall be speaking for Teesside and highlighting the various hurdles that many of our EIIs are facing there; but as a member of the energy-intensive industries all-party parliamentary group, I shall be speaking not just out of local or regional interest, but to highlight issues that are having an impact on industries the length and breadth of the country. The reach and scale of the problems extend far beyond the north-east, and to products such as cement, glass and ceramics.
If I may borrow a phrase from my hon. Friend the Member for Southampton, Test (Dr Whitehead), the next Government will come to power at a time when the three prongs of an “energy trilemma” are driving potentially competing agendas that must be addressed by any emerging energy policy. That means that, at the same time as taking steps to guarantee that our energy supply is secure, we require measures to ensure that energy prices for consumers, both domestic and industrial, are affordable, as well as movement towards decarbonising supplies to ensure that the energy sector contributes to carbon reduction rather than undermining it.
As I have already made clear, EIIs form the cornerstone of the United Kingdom’s manufacturing sector and, by virtue of that, the cornerstone of the wider economy. Figures for the sector vary, but the Environmental Audit Committee has suggested that EIIs employ 125,000 people in the UK. The UK’s foundation industries, which have a significant overlap with EIIs and account for higher numbers of supply-chain jobs, are reckoned to employ nearly half a million people—which amounts to roughly 20% of total manufacturing employment—generating gross value added worth £24.6 billion. Those industries account for between 3% and 4% of GVA across the UK economy as a whole. In the Tees valley alone, the process sector consists of more than 1,400 local firms in the supply chain, generating sales worth more than £26 billion a year and £12 billion of exports and comprising 50% of the UK’s petrochemicals GDP, while producing 60% of its chemical exports.
As well as being a key source of productivity, investment and employment, EIIs are central to our successful transition towards a low-carbon economy, manufacturing such “green economy” products as lightweight plastics, insulation, and components for wind turbines. For every tonne of carbon dioxide produced by the chemicals industry, more than two are saved downstream by its products. However, if we are to meet the carbon reduction targets set by the last Government—which, as Members will know, bind the UK to reducing carbon emissions by a third of 1990 levels by 2020, and 80% by 2050—significant reductions in emissions are required throughout the economy. In addition, as part of its EU obligations, the EU must obtain 15% of its energy consumption from renewable sources by 2020, which represents a fourfold increase on 2010. Electricity generation is expected to contribute most to the meeting of that target, primarily through the use of wind and nuclear power generation, but also through carbon capture and storage.
While the decarbonisation of electricity generation will be critical, along with measures to improve the energy efficiency of homes and transport, industry—which accounts for about a quarter of UK emissions—is rightly expected to make a substantial contribution. Given that EIIs account for more than 50% of industry-related emissions, they are expected to deliver reductions of at least 70% from 2009 levels by 2050. However, those obligations, although noble and justifiably ambitious, come with a set of associated difficulties.
EIIs operate in highly competitive global markets, and energy is typically their largest production cost. For instance, INEOS, which provides several hundred jobs at its Seal Sands site in Stockton North, tells me that electricity constitutes 70% of production costs associated with its manufacture of chlorine. As a consequence, energy price is business-critical, and it is only possible for the industries concerned to operate in countries with competitive energy prices. In other words, energy costs are influencing, if not directing, investment decisions for EIIs. At a time when the UK’s energy prices compare unfavourably with those in much of Europe and the rest of the world, that is bad news for the manufacturing sector as industries are driven towards more competitively priced markets such as the United States.
Let us take the cement industry, for example. Cement imports currently stand at 14% of UK consumption, up from just 3% in 2001. As the UK has enough cement import capacity to replace domestic manufacturing, there is a real risk that industries in the sector could take the decision to offshore production where costs would be lower. Such a decision would have damaging knock-on consequences. Not only will cement and concrete be vital for the construction of a new, low-carbon energy infrastructure, but the UK would stand to lose out on £2.84 of economic activity generated for every £1 spent on construction. Indeed, such “carbon leakage” can already be seen in the energy-intensive sector, with high-profile closures caused by these uncompetitive energy prices. BASF and Tata, for instance, last year announced closures resulting in over 600 job losses, doubtless a decision influenced by the energy costs, which are more than 50% higher than those of direct competitors elsewhere in Europe.
At the same time, other international companies are redirecting investment en masse to more competitive locations. While wholesale prices are driven by high gas prices, that is distorted by the very high policy costs imposed in the UK. Energy costs for industrial users in the UK are around 45% higher than in France and around 70% higher than in Germany—a competitiveness gap that is wider still in comparison with the US and China, where wholesale prices and policy costs are extremely low.
A stark example that hammers home the extent of this competitiveness gap is offered by GrowHow, based in my Stockton North constituency and at Ince near Chester, which has told me of the struggles it faces as a result of relatively high energy costs. Gas—GrowHow’s main feedstock—costs more than three times that of their Russian competitors, who operate on state-fixed gas cost. Similarly, German electricity prices on a delivered basis for very large users in 2013 equated to €38 per MW against £70 per MW in the UK.
The situation is set to get much worse over the next decade. The Department for Business, Innovation and Skills forecasts that UK energy and climate change policies will add around £30 to every megawatt of electricity for EIIs by 2020, substantially more than for any other country in the world. Needless to say, that is a huge threat to the entire energy-intensive sector—a threat that the next Government, regardless of colour or composition, must take steps to meet.
Joan Walley (Stoke-on-Trent North) (Lab)
I congratulate my hon. Friend on securing this debate. Does he agree that the huge energy security and energy affordability issues that we face place our manufacturing industries right at the cutting edge of how this debate is to be taken forward, but we must also not lose sight of the need in the long term to decarbonise, and in doing that we will be making our manufacturing industries more competitive? As my hon. Friend rightly says, there is a short-term issue in terms of transition to that low-carbon economy and it is for that reason that the Environmental Audit Committee, which I chair, recommended that there should be a particular strategy for companies that are intensive users of energy. We have not really seen any progress on that, and I hope that when the Minister replies to the debate we can really look at how we can make our manufacturing companies competitive, losing no time in making sure that we have an international agreement on climate change—because we must not lose sight of that—but keeping our manufacturing processes there in the short term to be there for the long term.
Alex Cunningham
My hon. Friend gives a comprehensive summary of where I think we should be, and I hope to develop some of the points she made later in my speech. This is not just about the short term; it is about planning for the future as well.
Of course, the situation with regard to these energy costs is set to get much worse over the next decade. As I have said, the Department for Business, Innovation and Skills forecasts that UK energy and climate change policies will add around £30 to every megawatt of electricity for energy-intensive industries by 2020—substantially more than for any other country in the world.
David T. C. Davies (Monmouth) (Con)
I have a great deal of sympathy with what the hon. Gentleman is saying. Does he agree that it is now time to scrap these ludicrous carbon taxes?
Alex Cunningham
Carbon taxes have been imposed by consecutive Governments for very good reason, but if our industries are to be competitive, the time has come to examine them carefully and to determine how we go forward. This is not just about taxation, however; we must also take into account the issues that my hon. Friend the Member for Stoke-on-Trent North (Joan Walley) raised a moment ago.
Needless to say, the rise in energy costs is a huge threat to the energy-intensive sector, and it is one that the next Government must address. That brings me back to the trilemma that I mentioned. The present Government have designed policies that focus on reducing carbon emissions from industry, but those policies, influenced by regulatory activities in the EU, rely heavily on measures that seek to enhance energy efficiency while putting a price on industry’s carbon emissions. A cap-and-trade market for carbon was created through the EU’s emissions trading system, introduced in 2005. That market spans the EU and aims to reduce emissions at the lowest possible cost while incentivising low-carbon investment by making emitters financially liable for their emissions. It is intended that, from 2013 onwards, the capping level will fall by 1.74% a year for power stations and industry, so that total emissions are 21% lower in 2020 than they were in 2005.
The Government responded to industry concerns with a compensation package of £250 million announced in Budget 2011 for the period 2013-15, boosted by a further £150 million and extended to 2016 in Budget 2013. But, by December 2013, the emissions trading system compensation scheme had paid out only £18 million to 29 companies in the energy-intensive industries sector. Part of the problem is that although member states are permitted to compensate those at risk of carbon leakage arising from the emissions trading system, there is no obligation to do so. This results in energy-intensive industries being burdened with additional costs, be it through burning fossil fuels and buying allowances to match their emissions, or indirectly through the higher electricity prices that result from generators burning fossil fuels. As we know, the costs are passed on to consumers.
However, because the weak carbon price in the emissions trading system was deemed too low to incentivise lower-carbon investment, the Government then added a further policy cost to the price of energy by introducing a UK carbon price floor to top up the carbon price to an acceptable target rate. This undoubtedly limits the competitiveness of EIIs, many of which are unable to pass those costs through to their customers.
In my role as a member of the all-party group—not to mention as an MP representing an industrial centre—I have regular contact with those in the energy-intensive sector and frequently listen to the issues that they find themselves contending with. Through those conversations, I understand that no other country has imposed a policy similar to the carbon price floor here in the UK, nor are there plans to do so. It has been widely acknowledged that the carbon price floor does not, in fact, reduce emissions from power generation; those are capped at EU level. Instead, the carbon price floor significantly increases the proportion of decarbonisation costs that is borne by UK electricity users. Those are costs that drive investment decisions and can lead to companies relocating overseas rather than developing their businesses in the UK.
To be sure, the EIIs that I have spoken to strongly support the drive for greater energy efficiency. In many cases, energy efficiency is more cost-effective than subsidising low-carbon generation. For instance, GrowHow tells me that, since 2010, it has reduced carbon emissions associated with its main fertiliser product by 40%. By reducing nitrous oxide emissions, it has made savings equivalent to more than 4 million tonnes of CO2, which means that, relative to its competitors, it is very efficient, and as much as three times as efficient as Russian producers.
Despite the fact that industry has delivered substantial energy and carbon savings over recent decades through investment and innovation, the cumulative impact of energy and climate policies is now putting extraordinary pressure on EIIs, necessitating continuous improvements in energy efficiency to remain competitive—although that is not to suggest that they are not doing that anyway.
Indeed, as industries approach the limits of what is realistically achievable with current technologies, the capacity of businesses to invest in the UK is ultimately undercut and the sustainability of the entire sector in the UK placed under threat. That, of course, brings with it the simultaneous possibility of the loss of jobs and investment to other countries with less vigorous climate change policies. That is disheartening, not just because of the obvious negative impacts for local economies and for the national economy more broadly, but because it overlooks the necessity to safeguard our existing industries and the employment they provide in order to make that all-important transition towards a low-carbon economy. Only through the continued provision of support to these industries can we hope to attract new investment.
We need look no further than Air Products in my constituency for an example of the types of investment in low-carbon industries that successful industrial clusters can attract. Shortly after committing to invest in building one of the world’s largest renewable energy plants on Teesside, the company announced investment in a second similar plant, influenced no doubt by the favourable business conditions that will see the wide availability of feedstock while allowing for local knowledge, skills and infrastructure to be used constructively and competitively. It speaks volumes that Sembcorp is developing with SITA a similar 35 MW plant on Teesside also to provide electricity from waste, further highlighting the potential for investment in the low-carbon economy that can result from the development of strong industrial clusters.
There can be no doubt that the Tees valley’s successful process industry cluster is central to the region’s position at the centre of the UK’s move towards a high-value, low-carbon economy, attracting significant investment over recent years and developing a reputation for green excellence. The area continues to work with government on a low-carbon action plan, on industrial carbon capture and storage, and on industrial heat networks as part of the city deal agreement, leading the way on bio-industries and energy from waste while increasingly being seen as a destination for green investment.
Such examples confirm the UK’s potential competitiveness on the international stage, but EIIs need access to secure internationally competitive energy supplies if they are to continue locating in the UK and investing in areas such as the Tees valley. That means having a level playing field for EIIs within the single EU market, taking account of the cumulative burden of climate policies on industrial energy prices. We cannot mistake the fact that the Chancellor deserves credit for capping the carbon price floor at £18 per tonne of CO2 from 2016 to 2020 instead of allowing a linear rise to £30 per tonne by 2020, as was originally planned. Calculations indicate that such a move could save UK EIIs in the region of £4 billion over three years, but that cannot disguise the fact that industries are still exposed to an expensive unilateral tax and received no form of compensation for the first year of its operation. With the compensation being announced a few years at a time, there is no long-term certainty about business costs, which deters investment in the sector in the UK.
Estimates suggest that the carbon price floor has already added 5% to EIIs’ energy prices and budget reforms will cap the impact at 8% from 2016 to 2020. Although that is certainly an improvement on the original trajectory, which would have added 14% by 2020 and 26% by 2030, we must recognise that even after this modest reform UK industrial electricity users still face four times the carbon cost borne by EU competitors, let alone competitors outside the EU, which do not face carbon costs at all.
Similarly, EU energy and environmental state aid guidelines published earlier this year limit compensation for the impact of the Government’s carbon price floor on electricity prices, so it can be paid only to EIIs in sectors already eligible for emissions trading system compensation. The Government therefore have no legal means of compensating EIIs for the impact of the carbon price floor in sectors such as cement, glass and ceramics, even where clear evidence exists of energy intensity and risk of carbon leakage. So despite the fact that indirect emissions trading system costs to the cement sector during the period 2014 to 2020 are estimated at £82.7 million, and the cost of carbon price support over the same period is estimated at £104 million, the European Commission’s guidelines conflict with UK domestic policy to allow support against the carbon price support tax for the cement industry.
Incidentally, representatives from that industry have pointed out that cement did not make it on to annex II of the EU ETS indirect CO2 aid guidelines because the tests that were applied were based on trade intensity of cement, which is currently only moderately traded, rather than the raw product before grinding—cement clinker—which is traded much more intensely. That leads to the conclusion that unless every EII sector is deemed eligible at the EU level for emissions trading system compensation, the only equitable solutions available to address this industrial competitiveness problem are withdrawal of the carbon price floor or efforts to reform the emissions trading system itself to encourage a stronger, more robust carbon price signal.
There can be no doubt that the UK must strive to avoid meeting its carbon targets by offshoring state-of-the-art energy-efficient EIIs. The objective must be sensible and economically sustainable decarbonisation, not de-industrialisation. In that respect, the UK’s status as the least energy-intensive economy in the G7 should perhaps be treated with caution rather than celebration.
We must think outside the box and look beyond punitive taxation schemes for alternative means to decarbonise, sending a signal to the rest of the world that it is possible to retain industry and decarbonise simultaneously and leading by example. A report last year by the American Chemistry Council found that 97 chemical industry projects worth a staggering $71.7 billion have been announced as a result of the US’s shale gas boom.
As a result of shale gas extraction, the price of energy and petrochemical raw materials in the US has plummeted, allowing a boom in the chemicals industry—so much so that INEOS tells me that the majority of its profit now comes from one-third of its business sales in the US. Although I am under no illusion that the UK will be able to replicate the US’s experiences entirely, extracting shale gas is likely to reduce energy and petrochemical raw material costs significantly. I also appreciate that fracking for shale gas is a controversial process and recognise the potential risks that it brings. But the appropriate response to concerns about the safety and environmental impact of shale gas extraction is to ensure that we have the right regulatory and monitoring framework in place. Any questions are best answered on the basis of evidence gathered from carefully regulated and comprehensively monitored exploration.
Although there is little prospect of fracking in north-east England, the abundant offshore coal reserves and potential for gasification present an opportunity to secure the future of EIIs—both in the Tees valley and the wider UK—while safeguarding thousands of jobs and helping to drive a much-needed economic recovery in the area. A failure to explore such options further would be an opportunity wasted.
Similarly, with the Tees valley already producing around 50% of the UK’s hydrogen and having an established hydrogen pipe network, the application of carbon capture and storage, as detailed in the region’s city deal, along with investments such as Air Products and the potential extraction of hydrogen from industrial sources mean that there is a significant opportunity to produce green hydrogen in Tees valley, which is capable of supplying the increasing demand for hydrogen fuel cells.
Our EIIs need support through this place, with a re-examination of taxes, carbon capture development and new energy sources. As recommended in the Environmental Audit Committee report, we need to set that path for maximum feasible decarbonisation, and I hope that we will do that soon.
Ian Swales
The hon. Gentleman makes an extremely good point, which I will return to later. When I see the UK’s attitude to these sorts of policies, I often feel like we are playing cricket, while other countries are playing rugby, boules or other sports that we do not recognise.
At the first meeting of the Energy Intensive Users Group, I was stunned not just by the number of outside attendees from industry, but by their seniority. We quickly realised that it was a huge issue that faced many industries, some of which have been mentioned. I do not think that paper has been mentioned. That is yet another industry that sent a representative from its trade body. As a result, there has been a great deal of representation to the Government. I am pleased to see at least some bending in response.
UK businesses that are involved in the generation and consumption of energy are saddled with up to seven different carbon taxes from the UK and Europe. Interestingly, even the senior executives of those businesses cannot always describe clearly what all the taxes are and what they do. Despite the action that the Government are taking, the trends are not great. It is estimated that political costs will increase the electricity bills of industry by a third by 2019-20. Policy makers do not seem to understand that if a company spends millions of pounds a year on energy, it already has quite an incentive to use less. It does not need to be beaten with a stick by the Government to persuade it to use less energy, let alone seven sticks. These companies know that they are spending a lot of money on energy, and are already doing a lot about it. They know that energy costs are a competitive issue, whether there are taxes or not. The irony of a heavy tax burden is that it removes cash from those companies that they could otherwise devote to energy-saving initiatives. Many companies work on thin margins or in commodity businesses that do not have high margins. The more taxes they pay, the less likely they are to be able to invest in reducing carbon consumption and generation.
A Minister from the Treasury rather than from the Department of Energy and Climate Change is responding to this debate, and I wish to ask about the attitude of the Treasury towards these taxes. Does it take the broad view about business competitiveness, look at the overall picture, and compare the taxes being rendered with those rendered from Europe, or is it just a way of raising money? These businesses are almost all competitive and traded internationally, so in this regard the UK is no more an island than the EU is. Our policy decisions affect these businesses on an international basis.
The hon. Member for Warrington South (David Mowat) mentioned the EU. The minute we want anything done, the standard response from civil servants is “State aid”. That is a perfect method of obfuscation and delay, which, in many areas, we as politicians are buying when we should instead be fighting a lot harder. I know there are specific issues with the steel industry and the EU, but many other industries are not as limited. Politicians should not allow state aid to be used as an excuse for delay or for no action, particularly given that some of the things we are talking about are, ironically, UK-only initiatives. I cannot see how the European Union can interfere with initiatives such as the carbon price floor, which are taken only in this country. I would like Ministers to be a lot more aggressive with civil servants, not just about whether state aid issues apply, but if they do, about how quickly they can be removed. Some of the issues I am thinking of have been washing around for most of the four years that I have been in this place.
Europe has the emissions trading scheme, which has not totally met its objectives, as the allowances originally given to companies were fairly generous but the tight market that was expected to lead to carbon trading has not occurred. Ironically, however, Sahaviriya Steel Industries in my constituency has a specific problem because it was virtually out of business during the reference period when the allowances were decided. It now pays $1 million a month in carbon cost to the EU, because it does not have enough allowances to operate. It is also expanding, so carbon costs are yet another handicap.
Businesses can do many things to reduce energy use, but as the hon. Member for Newcastle upon Tyne Central said, there are physical and chemical limits. I do not disagree with some of the EU moves on best available technology, or with new moves to look at what is technically feasible and ensure that companies in the EU move towards that best available technology. I hope that we do not get regulatory regimes that drive everybody else out of business if they are not the best, as that will not help anybody. However—I hope the Government will take notice of this—when the best available technology frameworks are established for different businesses, that will at least show what is possible with regard to reducing energy consumption and contribution to climate change. If a company is doing something in another country, we can do it here; if it is not being done anywhere, we must ask whether it is sensible to try to drive a company to use 50% less energy, for example. I would like to see constructive work with the EU on that, ensuring that we are as bold as we should be when dealing with its requirements.
Investment has been mentioned, and the manufacturing industry has been declining. During the previous Government, it went from being 19% of the economy to 10%, although some growth is occurring. I worry about these businesses because there is capital investment inertia. It is not about whether company A is operating today, tomorrow or next year; it is about what investment decisions are being taken. Are the plants being kept up to date and maintained? Above all, would the company concerned re-invest in such a business?
I remember my experience as a financial director in the chemical industry. We decided to get out of a business, but 24 years later that business is still running. It has never been renewed, but it has been patched up and sold three times since then. Those are the types of decisions taken. If we have an unattractive climate for investment in this country, things will close down not overnight but steadily, and we are seeing some of that.
The Engineering Employers Federation, which covers all the businesses we are talking about, says that energy costs are its No. 1 issue for growth and investment. Many of these companies are foreign owned. The biggest employers in my constituency are Singaporean, Thai, Indian, Saudi Arabian and Korean. Decisions are being taken not in the north of England or London, but in Seoul, Riyadh, Bangkok and so on. If our energy infrastructure costs do not look competitive and sensible, companies do not need to come here or re-invest.
Despite sounding somewhat critical, I welcome the Government initiatives. The mitigation moves that they have mentioned are helpful for big energy users in my constituency. I hope the initiatives will take place with due speed—that has been an issue—that there will be certainty and that they are not a one-off. We are talking about long-term businesses taking long-term decisions. If the Government believe that throwing a carrot towards a business for 12 months makes a difference—well, obviously it makes a difference to its cash flow in those months, but it will make no difference to its strategy. Uncertainty does make a difference in the wrong direction.
I welcome the fact that the UK Green Investment Bank is majoring in investing in industrial energy reduction, as well as renewable technology, and I welcome the renewable heat incentive, which should help. The regional growth fund has put money into such businesses—most recently, £9 million went into a huge project at Sabic in my constituency, which will result in the petrochemical cracker being able to crack gas. I am pleased about the Tees valley city deal, which I helped to push for and even construct. It will get carbon capture and storage around Teesside, which I still regard as the No. 1 location for investment in carbon capture and storage for industries outside the energy sector, although we have the energy sector as well.
Alex Cunningham
I am grateful to my new hon. Friend for giving way, and I believe that that is the central issue on Teesside. Will he join me in congratulating the industrialists on Teesside who, despite being competitors, have come together because they know that the future is about investment in carbon technology?
Ian Swales
I agree with the hon. Gentleman. Such a technology will create an infrastructure that will benefit all those sectors, and they do not compete that much with one another. The Tees valley can be a hotbed of competitive steelmakers, chemical producers and so on. Strategically, the country should get on with that.
All hon. Members have mentioned the importance of energy-intensive industries. They are important to the economy, to the development of green industries—let us think of the amount of steel involved in tidal power—and to the security of the country. We should not kid ourselves when we count carbon. In a debate a while ago, the hon. Member for Warrington South asked, “Is the carbon for my Volkswagen car mine or the Germans’?” We are kidding ourselves if we think we are doing the right thing by de-industrialising this country, exporting jobs and importing carbon. That is one point on which I depart from the hon. Member for Newcastle upon Tyne Central.
The Exchequer Secretary to the Treasury (Priti Patel)
I welcome today’s debate and congratulate the hon. Members for Stockton North (Alex Cunningham) and for Redcar (Ian Swales) on securing it, not least because it puts me through my paces in understanding the remit, this whole field and carbon taxes. It has been an insightful debate. The Government’s position has been discussed by a number of hon. Members, but we are clear in recognising the significant role that energy-intensive industries play in the UK economy. As my right hon. Friend the Chancellor said back at Budget 2011, we are committed to ensuring that manufacturing is able to remain competitive during the shift to a low-carbon economy and have pledged to do everything we can to help manufacturers play a valuable role.
We also recognise the difficulties that EIIs have faced as a result of high energy costs, and various cases and accounts of challenges that companies have faced have been cited in today’s debate. That is why we introduced a package of reforms at Budget 2014 radically to reduce the costs of energy policy for business, particularly for manufacturing, while improving security of supply—all right hon. and hon. Members would emphasise that we must do that—and maintaining the Government’s ambition for renewable generation deployment. That package will benefit every household, business and region in the country, saving a total of up to £7 billion by 2018-19. Businesses alone will save a total of £6 billion and the package will particularly benefit the most energy-intensive manufacturers, about 80% of which are based in the north of England, Scotland and Wales, as we have heard. The package will improve incentives for companies to return their manufacturing to the UK and help existing firms to compete in the global race. I do not want us to underestimate that term: we are about competition, we are open for business, and the Chancellor has consistently made the case that this is about British jobs and keeping the United Kingdom a competitive place for manufacturing in EIIs.
Manufacturing fell from being 19% of the total economy in 1997 to 10% in 2010, as my hon. Friend the Member for Warrington South (David Mowat) mentioned, but it has grown strongly in the latest quarter, at 3.3% compared with a year ago. Currently, energy-intensive sectors are responsible for 35% of UK manufactured goods exports. Obviously, the Government want to make the recovery of manufacturing last for the long term and be sustainable, and to have growth that is balanced across the entire UK. I think we would all agree that lowering energy costs is therefore vital for the international competitiveness of UK manufacturing.
If we had not introduced any measures at Budget 2014, UK firms would have been paying just above the average price for electricity among the 29 members of the International Energy Agency, with the proportion of this price attributable to policy costs rising over time, reaching about one third by 2020. That is why the Government announced the series of measures at Budget 2014 radically to reduce the costs of energy policy for business, particularly in EIIs. The measures included capping the carbon price support rate at £18 per tonne of carbon from 2016 to the end of the decade; extending EIIs’ compensation for the cost of the carbon price floor and the emissions trading scheme until 2019-20—I will address the points raised about compensation shortly; introducing compensation for EIIs for the costs of the renewables obligation and feed-in tariffs from 2016 to 2020, which is worth almost £1 billion, in order to protect these energy-intensive manufacturers from the rising costs of the renewables obligation and the feed-in tariffs; introducing, from 2015, an exemption to the carbon price floor for fuels used to produce good-quality electricity by combined heat and power plants for on-site purposes; and introducing new measures to make energy markets more competitive for very small businesses and to help them use smart meters to cut their bills.
I met a range of small businesses this morning. Although we are talking about large EIIs in this debate, these things also have an impact on small businesses, and the Government are very committed to listening to their concerns and addressing the issues they face. I am pleased to say that all businesses will see their electricity bills reduce as a result of this package, provided it receives the necessary EU state aid approval, which was also a subject raised in today’s debate. There will be a total reduction for business of up to £6 billion by 2018-19. The companies that use electricity intensively will see radical cost savings, as, when previous announcements are taken into account, they are now compensated for all Government policy designed to support low carbon and renewable investment up until 2019-20.
A typical energy-intensive business receiving the compensation measures in the package will save about £19 million by 2018-19. Such businesses include Lotte Chemical UK Ltd in the constituency of the hon. Member for Redcar, and GrowHow in the constituency of the hon. Member for Stockton North. Other manufacturers will also see a reduction in their bills through the capping of the carbon price support, which it is estimated will save a typical heavy industrial firm about £800,000 and a typical mid-sized manufacturer £50,000 in 2018-19 alone. That will increase the competitiveness of the UK’s energy intensive industries, which is important as this is all about supporting those industries to be more competitive, particularly in the global race. All businesses have recognised that this is about international competition and our place in the world. The Confederation of British Industry stated that our 2014 Budget package will
“put the wind in the sails of business investments, especially for manufacturers.”
The chief executive of the Engineering Employers Federation said that the Government clearly recognise the need to make UK competitiveness a priority. It is fair to say that the Government are doing their utmost to ensure that the UK is a place in which to do business. We have always said that to achieve a resilient recovery, the UK must back manufacturing.
The chief executive of Tata Steel’s European operations, which has a plant in the constituency of the hon. Member for Redcar, said:
“The measures announced in the Budget are extremely welcome. The Government has listened to the concerns of the foundation industries by introducing a limit on the policy costs they face. These measures are a clear and meaningful contribution to forging a more competitive and sustainable future for UK steelmaking sites, which employ 18,000 people directly and several times that number indirectly.”
The package of measures proves that the Government are determined to see manufacturing remain at the heart of the UK economy and competitive on the international stage.
On carbon pricing, over the next decade we need to attract investment worth more than £100 billion to replace and upgrade our energy infrastructure and to diversify the energy mix. The investment will help to ensure that the UK meets our long-term legally binding greenhouse gas emissions reducing targets and, importantly, to safeguard the country’s long-term energy security, on which we have only just touched in this debate. Establishing a minimum carbon price sends a credible signal to help drive that level of long-term investment in low-carbon electricity generation—a point that was made by the hon. Member for Newcastle upon Tyne Central (Chi Onwurah). But diversification is not concerned with renewable energy alone. The Government are committed to developing a wide range of energy sources to ensure that energy prices remain competitive in the future, and of course nuclear energy and shale gas are central to that.
We welcome the announcement made by INEOS last month that it plans to enter the UK shale gas market, because we are convinced of the benefits that shale gas can bring to industrial production.
Alex Cunningham
The Minister mentioned shale gas and other issues, but in the north-east of England, coal gasification could be a huge saver both for our region and the country. I hope that she will encourage the development of that industry.
Priti Patel
The hon. Gentleman is right that this is not about one or the other or even a trade-off, but about all players in the energy mix. We are talking about long-term energy, security of supply and competitiveness in the long-term energy market, and that requires diversity.
We are also continuing to look into the issues faced by energy-intensive industries. Today, Members have touched on the issues of carbon-reducing options and the competitive impacts. My hon. Friend the Member for Rugby (Mark Pawsey), who talked about CEMEX and the cement plant, touched on the fact that there are a range of sectors that are not on the European Commission’s list when it comes to exemptions and approval of indirect costs. Let me reassure Members that this is about not just an occasional conversation with the European Commission but about being absolutely firm and clear with it and pressing it on this issue. The Government, too, will look at the competitive impacts of their carbon reduction options through a series of road maps. I am talking here about the involvement not just of the Treasury but of the Department of Energy and Climate Change and the Department for Business, Innovation and Skills. This will help focus policy making more on the opportunities and barriers that energy intensive industries face, and allow Government and industry to agree on actions to deliver cost-effective decarbonisation while safeguarding competitiveness.
Over in Brussels, we will press the European Commission to review the list of energy-intensive sectors that are eligible for compensation, with the aim of extending it, given the higher energy costs they receive as a result of the EU emissions trading scheme and carbon price floor. This is an ongoing matter. It is fair to say that we are well placed when it comes to pressing the European Commission and to making our case.
We will press the Commission to provide a more targeted list of sectors most at risk from carbon leakage as a result of the EU emissions trading scheme, for its next phase which begins in 2021, so that the free allowances that these sectors receive can be best focused on those energy-intensive industries that need them the most. The Government are well aware of the cost pressures on the EIIs, and we have developed a suite of measures to reduce those costs, as well as the measures announced in Budget 2014.
Let me address the points that the hon. Member for Newcastle upon Tyne North (Catherine McKinnell) made about compensation. In Budget 2011, we made it clear that £200 million was available, and much that has been spent thus far is within the eligibility of the constraints of the state aid clearance process, and that is all within the framework of the process that has been set out. The hon. Lady rightly said that the Commission published its guidance on eligibility schemes in April this year. That has not been lost on us. We are not thinking, “Well, that’s that. It’s been and gone.” We are absolutely on to this matter. I will if I may come back to the hon. Lady on this with some specifics. It is absolutely not the case that we are not looking at this any more. We want to do everything possible to ensure that that money is going where it is needed and supporting the EIIs that need that compensation. Of course, this comes back to the statement that was made by the Chancellor in 2011. We announced measures in the Budget this year, but we know that more needs to be done, so we will follow this matter through.
We are continuing work in this area securing investment in low carbon technologies; supporting the development of a wider range of alternative energy sources; and working with individual industries as they seek to improve their energy efficiency. It makes business sense for those industries to improve energy efficiency, and they are all going through that process. We welcome this opportunity to set out the wide range of work this Government are doing to support energy-intensive industries as the UK transitions to a low carbon economy.
Alex Cunningham
We have had an excellent and informed debate this afternoon. It is clear that both the Minister and shadow Minister recognise the importance of our energy-intensive industries not just for the jobs that they support but for the products they produce for both the domestic and export markets.
It has been a truly Back-Bench debate, because it went across the political divide. There were lots of things on which we could agree, and a few things on which we could not. We have heard today of a list of world-class industries and companies that are the backbone of our economy and that need the help of this place. In her opening remarks, the Minister said that she was here to learn and be put through her paces. I hope she has been put through her paces and that when she leaves this place today, she can think that it is not about what has been done thus far, but what can be done next to support those important industries.
I am grateful to everybody who has taken part in the debate today. We have made it clear that we have shared anxieties about the pressures faced by our industries, and that those pressures cannot be allowed to run on and on. I hope and am sure that Ministers have recognised the real problems facing these industries, which provide many jobs—the numbers vary and are given as anything from 120,000 to 800,000. The industry is all-encompassing and it is important that we protect those jobs and also protect our traditional and not so traditional industries. We need to find solutions not only so that these industries are strengthened but so that we ensure that they are not diminished.
Question put and agreed to.
Resolved,
That this House welcomes the measures announced in the 2014 Budget Statement which reduce cost pressures created by the imposition of carbon taxes and levies; notes that without such measures, there is a serious risk of carbon leakage; further notes, however, that UK manufacturing still pays four times as much for carbon compared with main EU competitors because of taxes such as the carbon floor price; and calls on the Government to build on the measures announced in the Budget by producing a strategy for energy-intensive industries, as recommended by the Environmental Audit Committee in its Sixth Report of Session 2012–13, HC 669, in order to produce a fairer and more efficient system which delivers genuine potential for investment in a low-carbon economy.
Amendment of the Law
Alex Cunningham Excerpts(10 years, 8 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mr Douglas Carswell (Clacton) (Con)
It made a pleasant change to listen to a Budget that had not been pre-announced in the previous day’s newspapers. That is as it should be, and it is a welcome change from what went on in the past, when details were leaked and briefed beforehand.
Parts of the Budget are absolutely magnificent, and I am particularly pleased about the decision to raise the income tax threshold. Many of my constituents are on relatively low incomes. Before 2010, people paid income tax after the first £6,500 of income, but now they will pay it only after the first £10,500. It is absolutely right that people be allowed to keep more of the money that they earn. It is absolutely fair to have this tax break—it is a tax break for everyone—and it does the right thing by incentivising work. It helps to end the crazy situation that has been engineered whereby the state takes tax from families with one hand and gives handouts with the other—a bizarre situation that got vastly worse between the years 2001 and 2010.
Alex Cunningham (Stockton North) (Lab)
The hon. Gentleman talks about the £10,500 limit, but will he spare a thought for the thousands of workers on Teesside, and millions more across the country, who do not earn anywhere near £10,500? They are seeing a rise in the cost of living, energy bills and everything else, and they are not benefiting at all from the Budget. Has he got something to say to them?
Mr Carswell
I would love to cut tax right across the board on a whole range of things, which would help people in that situation. The reduction in income tax for people on relatively low incomes will undoubtedly be welcomed.
I am also thrilled and delighted—it warmed the cockles of my free-market heart—to hear about tax breaks for savers. With interest rates having been so low for so long, it has been a pretty torrid time for savers. The raising of the personal tax-free savings allowance is fantastic news. So, too, is the removal of the artificial distinction between different types of ISAs. The more we can encourage people to save, the better. One person’s deferred consumption and saving is somebody else’s loan or credit.
I cheered, too, when I heard about giving folk flexibility as to how they use their pension pot. The implications of that are potentially profound and radical. It could mean that pension pots no longer die with people. It could mean that they become a vehicle for passing wealth down the generations. The implications are potentially huge and welcome.
Ms Karen Buck (Westminster North) (Lab)
This is a budget that does little or, in many cases, nothing for the millions in the lowest income groups in this country. Unsurprisingly, the chief executive of the Joseph Rowntree Foundation has said:
“This is a Budget for the people who already have, not the people who need to benefit most from the return to growth.”
It is a lost opportunity to help the 13 million people on low incomes, who are unlikely to see any benefit from these measures. That assessment fits in with the analysis of the Institute for Fiscal Studies, which shows that more than 300,000 children will be pushed back into absolute poverty over the course of this Government and that, on present trends, 900,000 children will be returned to relative poverty by 2020. That will undo everything that the last Labour Government did to tackle poverty. The Budget sets a cap on overall social security spending while doing little or nothing to tackle the drivers of rising social security spending, especially among working people who are being squeezed by rising housing costs.
I want to talk about two policy areas that lie behind these failures. As we have heard, households have suffered the longest period of falling living standards and squeezed wages since the 1850s. We have had 50 consecutive months of a wage squeeze below inflation. I came into politics because I was driven by concerns about unemployment, and the growth in job numbers is undoubtedly good news, but it would be completely wrong to see the growth that has been achieved in recent months as an unalloyed success story. Among other things, one third of a million families are now working fewer hours than they want, with more people being forced into part-time employment. The latest job figures show 211,000 people entering self-employment, which represents a large proportion of the recent jobs growth. Self-employment is undoubtedly a good thing for many people, but one problem is that it is strongly associated with low pay. Low pay is part of the crisis that is underpinning the fall in living standards.
Alex Cunningham
My hon. Friend has quoted one organisation; let me quote another. Gillian Guy of Citizens Advice has said:
“The chancellor talked about making, doing and saving. This budget needs to work for those who are making do and can’t save”.
Are those the people that my hon. Friend is talking about?
Ms Buck
I am talking about the 13 million people on very low incomes, many of whom have incomes that are so low that they will not benefit from the change in the income tax threshold, welcome though that is. It will do nothing for the people whose earnings are already below it.
There are 5 million workers on low pay in the UK—one in five of the work force. That is one of the highest proportions in the developed world. The academic consensus shows clearly that the minimum wage, although fiercely and wrongly opposed by the Conservatives, boosted earnings without causing unemployment. It has all but abolished extreme low pay, but in recent years there has been an increasing spike in the number of workers on the minimum wage. The proportion of workers on the minimum wage has grown by nearly 60% in the past five years. Rather than being part of a continuous process of uprating the pay of those on low incomes, it is now becoming the going rate in many sectors. That is one of the causes of falling living standards for millions of people and of increased social security spending.
This is a particular challenge for London. Londoners did not benefit as much from the introduction of the national minimum wage as did people in many other parts of the country, because of the slightly higher wages. The trend towards more workers earning at or just above the level of the minimum wage has exacerbated the crisis in living standards in London.
As well as low pay, another challenge—and another driver of social security spending—is housing costs. It was interesting to see that yesterday’s report from the Office for Budget Responsibility stated:
“The largest driver of the rise in spending on housing benefit has been caseload growth in the private rented sector…The rising proportion of the renting population claiming housing benefit may be related to the weakness of average wage growth…almost all the recent rise in the private-rented sector housing benefit caseload has been accounted for by people in employment.”
The relationship between low pay—and a failure to uprate pay over a number of years—and rising housing costs is driving more and more people, particularly working people, into dependency on housing benefit.
None of us wants to see expenditure on keeping people unemployed or lining the pockets of private landlords by subsidising higher rents. We all want to see a fall in social security spending on these things, but while pay is low, while average living standards are not rising and while rents are rising, we are going to see more costs and expenditure in that area. But there is a solution. The Chancellor promised a rise in the national minimum wage to £7, but we saw a 17p increase. Many employers across the country could pay more than the national minimum wage and they should be encouraged to do so.
We will not see a cut in social security spending unless and until we reverse the calamitous fall in the building of social housing, which is the only safe and secure means of ensuring that low-income people have low housing costs. Combine those two things and we will see a major shift away from the social security spending, which we would like to see fall, into a rise in living standards for millions of people. This Budget has not been able to provide that.
Alex Cunningham (Stockton North) (Lab)
When the Chancellor rose to his feet yesterday, people across the country hoped he would have something to offer on the escalating cost of living and an economy that has seen the value of wages shrink. People in the north-east hoped he would offer help to do something about the highest unemployment levels in England. Nearly 1 million young people out of work, many for more than a year, hoped for some kind of job guarantee that would see them earning a living and learning along the way, and public sector workers hoped for a better deal and a fair reward for their work, but it was not to be. Instead, as we heard my right hon. Friend the Leader of the Opposition say, we have a Government who are able to give millionaires a £200,000 tax cut but cannot increase nurses’ pay by £250 a year. This is a Budget with inequality written all over it.
By failing to address the growing problems of inequality, higher prices, falling real wages and catastrophic housing shortages, the Chancellor has confirmed that any recovery that exists is being felt only by the privileged few. I have already alluded to the comments from Citizens Advice chief executive, Gillian Guy, who said:
“The Chancellor talked about making, doing and saving. This Budget needs to work for those who are making do and can’t save.”
She continued:
“We’re halfway through the austerity programme and many spending cuts have yet to bite. Families are feeling the cumulative impact of the stripping away of support and services from all sides.”
Citizens Advice tells us that
“3 in 5 people worry about the effect rising household bills will have on their finances over the next year…Half of UK adults— 27 million people—will have to cut their spending to cope with household costs. 1 in 4 people coming to Citizens Advice have some kind of debt problem”
and that 40% of them have dependent children.
That tells a tale not of a country where people are benefiting from the Government’s policies, but where inequalities are growing and families are suffering. Nowhere is that more the case than in the north-east, which, having contended with colossal cuts in the public sector and minimal investment, continues to have both the highest rate of unemployment and the lowest average weekly earnings in England.
Working people are already £1,600 worse off under the coalition Government than they were before the general election in May 2010, but that is exacerbated in the north-east by wages that are about £50 per week less than the UK average and almost £200 per week less than wages in London. Yet the Chancellor’s announcements yesterday do nothing to address this unfairness. While some will feel the marginal effect from the tweaks made to the personal tax allowance, thousands of hard-working and low-paid people across Teesside, striving to eke out a living for their families, will be even worse off as their limited incomes are stretched even further to meet rising energy, food and other bills. Many in my constituency simply earn too little to benefit from the Chancellor’s tax cuts, and can only dream of earning the £1,250 per month that can now be saved tax-free in ISAs, let alone being able to save this amount.
Let us not forget that while the Chancellor was making heedless efforts to encourage saving, Britain’s household borrowing is at a record high, equivalent to an average household debt of £54,000. So while the chairman of the Conservative party tediously patronised hard-working people by lauding minuscule cuts to the costs of beer and bingo, more families owe more money than ever before. This low-wage recovery means many have to deplete any savings they may have had, driving greater inequality and fuelling a growing demand for extra support—most worryingly, in the form of food banks.
Such naivety is just another demonstration of exactly how out of touch the Conservative-led coalition is with hard-working families. But too often the north-east is characterised precisely by the challenges that inequality poses, and not by the potential that exists in the region were it to be given the right opportunities to thrive and flourish. It is those opportunities that the Chancellor failed to deliver. Enhancing the mix of skills and knowledge within the regional economy, aligning them with those needed by businesses in the north-east, would be the first step to closing the skills gap.
While businesses such as Sembcorp on Teesside are managing to create jobs and recruit apprentices, many smaller firms struggle to share their expertise and skills owing to the lack of support they need to make a real impact. We have had some help from the regional growth fund money and an enterprise zone, and the Budget contains some welcome, albeit limited, positive news for energy-intensive industries on Teesside. But welcome as those things are, their value pales into insignificance in comparison with the support and investment for the north-east each year from 1997 to 2010. We really could have done with something in the Chancellor’s Budget to stimulate growth in the green economy on Teesside, an area that holds great potential both for growth and investment. Companies such as Air Products and INEOS are investing on Teesside, despite ongoing and tedious regulatory hurdles, but the Chancellor yesterday offered no incentive for others to follow suit. As a result, potential investors have been deterred and we have seen a large-scale investment slump from an all-time high of £7.2 billion in 2009 to £3 billion in 2012. This Budget comes back to one word: inequality.
Sajid Javid
My hon. Friend is absolutely right. It is under this Conservative-led Government that the rich are paying a higher proportion of tax than in each year the previous Government were in office.
Yesterday’s Budget also provided targeted support for some of those industries that are critical for our economy. It showed that we are supporting our construction sector by offering £500,000 to small house-building firms; that we are supporting our oil and gas sector by introducing a new allowance for ultra-high pressure, high-temperature fields, a measure that will increase investment and jobs; and that we are supporting our creative economy by introducing a theatre tax relief and extending our film tax credit, a measure that will build on the astronomical success of films such as “Gravity”. All those measures will put money and trust back into the hands of businesses, and give them the power to invest, expand and employ.
Yesterday’s Budget was all about trust—trust in the imagination and hard work of the British people to turn our economy around, and trust in the fiscal prudence of the British people to take their hard-earned pensions when they want, and to invest and spend them how they want.
Sajid Javid
I am afraid that I do not have time.
Most importantly, the Budget was about trust in British businesses, as was highlighted by my hon. Friends the Members for Dudley South (Chris Kelly), for Poole (Mr Syms), for Stroud (Neil Carmichael) and for Norwich North (Chloe Smith).
Alex Cunningham
I am grateful to the Minister. The IFS has said today that the pension changes are based on “highly uncertain assumptions” that could lead to “market failure”. Would the Minister care to discuss that?
Sajid Javid
The pension changes will give people a choice that they have never had before: it is their pension, and it is their choice.
Our businesses are not, as the Opposition would have us believe, the enemy; they are the reason why our economy is growing faster than any other advanced economy. They are the reason why more than 1.6 million jobs have been created in the private sector during the past four years. Many Opposition Members have spoken today about the importance of bringing down unemployment, on which they are absolutely right to focus. They might have some good ideas about how to do it, so I thought that I would look at the facts. I can report that unemployment went up during Labour’s last term and has fallen under this Government in the constituency of every Opposition Member who has spoken today. For example, in the constituency of the hon. Member for Coventry North West (Mr Robinson), who is not in his place, unemployment went up 98% under Labour, and is down 29% under this Government. In the constituency of the hon. Member for Rutherglen and Hamilton West (Tom Greatrex), it went up 96% under Labour, and is 17% down under this Government. Which Opposition Member saw the largest increase in unemployment? The right hon. Member for Morley and Outwood (Ed Balls) saw a record increase of 184% in unemployment in his constituency during Labour’s last term, when he was in office, but it is down 21% under this Government. As expected, Opposition Members know how to create problems, but they have no idea how to solve them.
This Government trust businesses and want to help them, and we want to help the savers, the doers and the makers. This Budget does all those things, and I commend it to the House.
Ordered, That the debate be now adjourned.— (Mr Gyimah.)
Debate to be resumed Monday 24 March.
National Minimum Wage
Alex Cunningham Excerpts(10 years, 10 months ago)
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Rachel Reeves
Many people earning £6.31 an hour will be shocked and outraged to find out that bankers this year will get bonuses worth more than they earn, but they will be even more shocked to find out that they are the ones who are paying for those bonuses.
Alex Cunningham (Stockton North) (Lab)
I am suspicious about a tomato company that is expanding in my constituency. It appears to be replacing Stockton workers with people from overseas and paying them the minimum wage. I am told that those foreign workers are charged accommodation costs, so reducing the value of that wage. The company will not answer my letters. Does my hon. Friend understand my suspicions?
Rachel Reeves
I will come to that point shortly because the number of firms that are getting out of paying the minimum wage is incredibly worrying. We suggest increasing the fine to £50,000 for not paying the minimum wage, but there is no point in having such a fine if the legislation is not enforced.
Vince Cable
I do not know about the numbers, but certainly the minimum wage, in real terms, has declined by 5%, as a result of my predecessor on two occasions and me on three occasions following the advice of the Low Pay Commission.
Alex Cunningham
The RBS bankers and others in the City who led us into this terrible economic situation do a lot better than the national minimum wage, so does the Secretary of State think they should get bonuses of more than 100% of their salaries?
Vince Cable
I think hon. Members have had a chance to debate that already. I am a great advocate of the new model developed by Handelsbanken of relationship banking and no bonuses—that is what we ought to have—but I suspect that even their branch managers are paid above the minimum wage.
Armed Forces (Recruitment Age)
Alex Cunningham Excerpts(11 years, 6 months ago)
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Westminster Hall is an alternative Chamber for MPs to hold debates, named after the adjoining Westminster Hall.
Each debate is chaired by an MP from the Panel of Chairs, rather than the Speaker or Deputy Speaker. A Government Minister will give the final speech, and no votes may be called on the debate topic.
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Alex Cunningham (Stockton North) (Lab)
I am delighted to serve under your chairmanship this afternoon, Mr Davies, although I wonder whether, in different circumstances, I might hear you use the words “nanny state” after you hear what I have to say.
I am pleased to secure this debate on a topic that most hon. Members will agree is sensitive and important. I have every respect for the hon. Member for Milton Keynes North (Mark Lancaster), who has served with distinction in our armed forces and who will respond to the debate, but I am disappointed that the Ministry of Defence could not field a Minister to do so.
That said, I do not consider this a party political question, and Governments of all colours have maintained the status quo. In fact, when I raised the issue during the Armed Forces Public Bill Committee in 2011, the challenges from my own colleagues were even more robust than that from the Minister for the Armed Forces, the right hon. Member for South Leicestershire (Mr Robathan), who was then Parliamentary Under-Secretary of State for Defence. The purpose of this debate, however, is to raise the profile of the issue and to ask the Government to consider being the one that makes this much-needed change.
Most people know that the armed services in Britain can recruit from the age of 16 upwards. Most accept it as simply the way things are, but I think many have never really considered what it means to enlist 16 and 17-year-olds and whether the needs of the military really justify that position. It strikes me as amazing that in the 21st century we have 16-year-olds deciding to sign up for the UK’s armed forces—and, in time, for combat roles—when the vast majority of nations across the globe have ended the recruitment of children.
It is correct that recruits do not take part in armed conflict until they are 18, but 16-year-old recruits overwhelmingly enlist into combat roles, so as soon as they turn 18 they can be sent to the front line. Those enlisted as adults are less likely to be in front-line combat positions. I am pleased, however, that following the 2011 Public Bill Committee, the Minister amended the terms of service regulations to allow young people up to the age of 18 to leave the armed services, but he now needs to do more.
Patrick Mercer (Newark) (Con)
I am most interested in what the hon. Gentleman is saying. Having commanded a company of junior leaders and a battalion of more than 1,000 regular soldiers, I seriously challenge his figures. How can he possibly say that the majority of adults do not go into combat roles and that combat roles rest more with those who are recruited at 16? Nothing in my 25 years as an infantry officer supports that.
Alex Cunningham
I respect the hon. Gentleman and his work in the military. Perhaps he has more knowledge of the matter than I do, but my understanding is that it is less likely for a person who enlists as an adult to be in front-line conflict. I will check my facts and ensure that, if I address the situation again, I am correct.
The time has come to heed the advice of Child Soldiers International, the Children’s Rights Alliance for England, UNICEF, the United Nations, the Joint Committee on Human Rights and the Select Committee on Defence and raise the lowest age of recruitment from 16 to 18.
Jim Shannon (Strangford) (DUP)
I spoke to the hon. Gentleman before this debate. Through my role in the armed forces parliamentary scheme and my contact as a cadet force representative in Parliament for those in Northern Ireland, over the past 20 years I have met some of the most excellent young men and women. They have tremendous qualities and, having been introduced to the Army at 16, are leaders of men today. With great respect, I cannot understand how the hon. Gentleman can advance this point of view when we all have experience of young people who excel at what they do having being inducted at 16.
Alex Cunningham
I have no doubt that there are young people recruited at a very early age who go on to excel, but there are some people who might have chosen a different path had they been given the opportunity. I will address some of that later in my speech.
There is no similar under-age recruitment in other dangerous public service vocations, such as the fire or police services. Young people under 18 are legally restricted from watching violent war films and playing violent video games, yet they can be trained to go to war.
Not many people realise that having 16 as a minimum recruitment age is hardly typical among developed and democratic countries. In fact, the UK is the only member of the European Union and the only permanent member of the Security Council that still recruits at 16. We are one of only 20 countries that continue to recruit at 16, while 37 countries recruit from the age of 17. We receive the same criticism as several countries that I am sure no one here would want to see us lumped in with.
The United Nations Committee on the Rights of the Child has asked the Government to
“reconsider its active policy of recruitment of children into the armed forces and ensure that it does not occur in a manner which specifically targets ethnic minorities and children of low-income families”.
I am saddened that such language could be used about our country.
John Glen (Salisbury) (Con)
Will the hon. Gentleman make a clear distinction between those countries that routinely exploit children as young as 10, 11 and 12 and this country, which recruits 16 to 18-year-olds in non-combat roles where they have an opportunity to change their view of what they want to do at 18 and beyond?
Alex Cunningham
There is a tremendous difference between countries that deploy children as young as 12 or 13, or even younger, and what we do in Britain, but we are still recruiting children into our armed services. Although they do have the opportunity to leave the armed services before the age of 18, they do not have to make that specific decision. I will address that later in my speech.
Despite the recommendations from the various groups I have mentioned, no British Government have yet carried out a feasibility study for an all-adult military. I realise the Minister’s representative cannot speak for previous Governments, but is that something on which the Government will keep an open mind? Is it something that will be considered within the MOD?
I certainly do not wish to denigrate the efforts of our troops and those who serve at the age of 16 and 17. They serve our country proudly and should be congratulated, like all armed service recruits, on their bravery and commitment, but these are decisions that should be made on the basis of as much information as possible and with full adult consent—and I do not mean the signature of a parent or guardian, but young people making their own decision when they reach adulthood.
Alex Cunningham
No, I will not.
In most other walks of life, we would not expect 16-year-olds to make commitments that could potentially endanger their life and safety, and I hope hon. Members agree that the armed services should not be any different, although I again acknowledge the change that means recruits now thankfully have the right of discharge up to their 18th birthday. I also hope that Ministers will agree that someone at that young age is not equipped to take such a serious decision that could bind them to fighting on the front line, in some cases many thousands of miles from home.
That commitment to duty is often made when the recruit is 16 years old, with no obligation proactively to reconfirm their enlistment once adulthood is reached and they can be deployed. We ask an awful lot of our recruits. Teenagers are significantly less mature emotionally, psychologically and socially, and young people from deprived backgrounds, who form the majority of under-age recruits, are particularly vulnerable. It can be no coincidence that recruits who sign up as minors suffer higher rates of alcoholism, self-harm and suicide than those who enlist as adults.
Aside from the moral rights and wrongs of tying children to service at a later date, there is a compelling fiscal case for an all-adult military. Based on data from the MOD compiled by ForcesWatch, the cost of recruiting and successfully training those aged 16 to 17-and-a-half is between 75% and 95% higher than for adults. The longer period of initial training, at 23 weeks or 50 weeks, is enormous compared with the 14 weeks for adults.
According to the latest report of Child Soldiers International, “One Step Forward,” the annual saving of increasing the armed services recruitment age could be up to £94 million, which is enough to fund more than 24,000 civilian apprenticeships. I doubt the MOD wants to surrender even more of its budget, so that cash could instead be used elsewhere to offset the cuts that will see it reduce its regular fighting force from 102,000 to 82,000 by 2017.
I do not want to make my case on the basis of cost savings, but I hope that those who are more motivated by fiscal concerns will see the scope for assisting with the MOD’s commitment to cutting its costs. If the Minister’s representative is not convinced by my argument, or interested in the substantial savings, he may be motivated to make changes because of their political appeal. In March 2013, ICM asked respondents what they thought the minimum age should be to join the forces. Some 70% of those who expressed an opinion said it should be 18, so there may well be votes for him and his colleagues in a change.
There are also issues of long-term social mobility and employability to consider. I have no doubt the Minister’s representative will rehearse the well-worn argument that the Department uses of giving employment and training opportunities to young people who may otherwise be unemployed. The fact is, however, that most 16-year-olds are not in the market for work. In 2009-10, 94% of 16-year-olds stayed on in education. Others may argue that the armed forces provide for young people who come from difficult home circumstances, from a background of suffering abuse or simply because they have been thrown out on the streets. As I argued during the Armed Forces Bill Committee nearly three years ago, the armed forces must not be seen as some kind of escape route from abuse or unemployment. As a nation, we need to develop the support and services young people need, rather than holding up the armed forces as an easy option so early in life.
While I am pleased that the Army continues to set targets for functional skills qualifications in literacy and numeracy, the case can be made that young recruits would be much better served by the state education system in developing those skills. A higher minimum recruitment age would mean that young people need not choose between a higher standard of post-16 education and armed service.
Our country would be better served by an all-adult military. Is it right that many soldiers serving in Afghanistan find themselves there due to a decision they took when they were still children? It is a decision that many would have reversed in adult life, had they been given the chance. We should listen to what the United Nations and the Joint Committee on Human Rights are saying, and join with the overwhelming majority of nations worldwide, which have stopped recruiting children—that is what they are: children—and have raised the age to 18 and upwards. We could do it because it would save the Government money or because it would be popular, according to the polls, but I hope we do it because it is the right thing to do and so that we can leave the military to adults.
The Lord Commissioner of Her Majesty's Treasury (Mark Lancaster)
It is a pleasure to be able to respond to this debate, and I start by congratulating the hon. Member for Stockton North (Alex Cunningham) on securing it. I acknowledge his genuine concern about the recruitment age for armed forces personnel and, in particular, the recruitment of those under the age of 18. I fondly recall serving with him on the Armed Forces Bill Committee a couple of years ago and to his credit he has been consistent in his view; he raised this issue then.
Let me begin, however, by reminding the House that there is no compulsory recruitment into the armed forces. All those under the age of 18 are volunteers and the Ministry of Defence takes pride in the fact that our armed forces provide challenging and constructive education, training and employment opportunities for young people while in service, as well as after they leave. The armed forces remain the UK’s largest apprenticeship provider, equipping young people with valuable and transferable skills for life.
I declare an interest, because I applied to join the Army before the age of 18. I went through a regular commissions board, and I made an informed choice to join the Army when I was still a minor. Although I did not attend Sandhurst until shortly after my 18th birthday—a short course for the type of commission I was undertaking—I recall my time in the regular Army while I was a teenager with great pride and a sense of satisfaction. That may in part be due to my posting to Hong Kong, but that is another matter.
I thought it would be useful for the House if I set out our recruitment policy. The minimum age for entry into the UK armed forces reflects the normal minimum school leaving age of 16, and although changes under the Education and Skills Act 2008 are being progressively introduced between 2013 and 2015, the minimum statutory school leaving age will remain at 16. Participation in education or structured training will be mandatory until 18. In the services, all recruits who enlist as minors and do not hold full level 3 qualifications are enrolled on an apprenticeship scheme unless their trade training attracts higher level qualifications. All undertake structured professional education as part of their initial military training and therefore automatically fulfil their duty to participate under the new regulations. No change in policy is required.
Many individuals who join under the age of 18 are not academically high achievers and the duty of care and the training that the armed forces provide enhances their self-esteem and prospects for their whole working life, within or without the services.
Alex Cunningham
I think I omitted this part of my speech, but I wonder whether the actual educational outputs for young soldiers are poor. What will the Government do to drive up the amount of education, so that they have transferable skills when they leave the armed forces? We find that so many of them do not have those skills.
Mark Lancaster
I am afraid I disagree with the hon. Gentleman. In my experience as a Royal Engineer, I commanded some young soldiers. The standard of the training in the secondary skills they obtain, be it in bricklaying or plumbing or as an electrician, was second to none. I experienced that first hand, so I do not agree with his point.