Annual Pension Allowance (Transferred Workers)

Andrea Leadsom Excerpts

Wednesday 3rd December 2014 Commons Chamber

[The Economic Secretary to the Treasury (Andrea Leadsom)]

I congratulate the hon. Member for Chesterfield (Toby Perkins) on securing this debate. It is a complicated subject and he explained it very well. I am sympathetic to the issues that he raised. He will know that the Government greatly value the important work that is carried out by public sector workers and by those who were previously in the public sector.

The hon. Gentleman discussed the effect of the annual allowance rules for tax-relieved pension savings. He will, of course, be aware that we live in difficult economic times and that few households in this country have not been affected in some way by the economic crash of 2008-09. As part of our deficit reduction plans, the Government had to make difficult decisions in 2010 and 2013 to restrict the cost of pensions tax relief by reducing the annual allowance from £255,000 to £50,000 from 2011-12 onwards and to £40,000 from 2014-15 onwards. We put those restrictions in place to ensure that the cost of pensions tax relief remained affordable and sustainable.

The hon. Gentleman raised a number of concerns about the way in which the annual allowance rules work for defined benefit pension schemes in the context of bridging pensions, which can affect individuals who are transferred from the public sector under TUPE. Although I cannot comment on the particular circumstances that he raised, it might be helpful if I give some background to those rules.

The annual allowance rules provide a limit on the amount of tax-advantaged pension savings that can be made for individuals each year in registered pension schemes. Savings in excess of the limit are subject to the annual allowance income tax charge. For individuals in defined contribution schemes, it is straightforward to determine the level of contributions paid into a scheme to be assessed against the annual allowance limit. However, the position is more complex for defined benefit schemes because individuals accrue a right to an amount of annual pension from a set pension age, and the level of contributions made by the individual and the employer does not reflect the increase in the value of the member’s pension rights. We therefore needed a method to calculate the deemed level of contributions to test against the annual allowance. That method would have to be actuarially equivalent to the amount required to fund a similar promise in a defined contribution scheme.

Detailed consultations were held with the pensions sector before the rules were introduced in 2006, and in 2010, when the Government consulted on the reduction in the annual allowance. As a result of the consultations and with support from the pensions sector, the amount of defined benefit pension savings in a year, when measured against the annual allowance limit, is broadly equivalent to the increase in the capital value of a promised pension over that period.

To achieve the method of valuing pension savings under defined benefit schemes, special rules were developed so that for each £1 a year of pension that will be payable, the present capital value of that annual pension benefit is £16. The use of the 16:1 factor to value defined benefit pensions promises was adopted from April 2011 when the annual allowance was reduced, following recommendations by the Government Actuary. Before that, the factor was 10:1. The rules are intended to strike a balance between providing a system that is reasonably simple for individuals to understand and for pension schemes and HMRC to administer, and meeting the Government’s fiscal objectives.

The hon. Gentleman raised concerns about the treatment of bridging pensions under annual allowance rules. Tax relief is provided for pension savings under defined benefit schemes on the understanding that the funds are used to provide an income throughout retirement. To support that aim, scheme pensions must normally be payable for life, and must not decrease except in prescribed circumstances. One such circumstance is where a bridging pension is paid and the reduction occurs between age 60 and state pension age. A bridging pension is a temporary increase to a private pension. Typically, it is provided where individuals retire before reaching state pension age, and where the level of the bridging pension is broadly similar to the expected state pension. When the state pension starts to be paid, the bridging pension is reduced or comes to an end.

Where the bridging pension is offered as a discretionary award, or is a benefit to which the individual becomes entitled only if they choose to retire early, the award of the additional pension may give rise to pension savings in excess of the annual allowance limit. That is because the temporary nature of the increase to an individual’s pension is not recognised in the same way that increases to the pension’s capital value is calculated for annual allowance purposes.

The Government have considered whether special annual allowance provisions should apply for bridging pensions, and that can be found in our response to consultations on the reduction of the annual allowance limit from 2011-12. We recognise that the restriction of relief may create particular challenges for members of defined benefit schemes because of the way promised benefits in those schemes are valued, but we concluded that it would not be desirable to complicate the pensions tax regime by including special provisions for bridging pensions. Instead, we introduced special rules intended to mitigate “hard cases”. Those rules allow individuals to carry forward unused annual allowances from the three preceding tax years, and set them off against pension savings above the annual allowance limit in a single year, providing that the individual was a member of a registered pension scheme during those three years. They also allow individuals to meet annual allowance charges of more than £2,000 from their pension scheme. That is known as the “scheme pays” facility.

The hon. Gentleman raised concerns that when a bridging pension paid to an individual from one scheme comes to an end, future pension payments to that individual from that scheme are treated as unauthorised payments and liable to tax at a rate of up to 55%. As I have set out, scheme pensions can reduce only in certain prescribed circumstances. Where they are reduced in any other circumstances, unauthorised payments will arise and be subject to certain tax charges. The legislation for that is clear, has applied since April 2006, and is set out in schedule 28 to the Finance Act 2004. Those rules support the aim for defined benefit schemes to provide an income throughout retirement while protecting against manipulation of the tax-free lump sum.

This is not a simple area. Although annual allowance rules for defined benefit schemes may appear difficult to understand, they are a necessary part of meeting the Government’s fiscal and policy objectives of targeting tax relief effectively. The rules are intended, as far as possible, to provide a straightforward structure for individuals and schemes, but I recognise that there may be particular cases where the rules do not work as intended. I am grateful that the hon. Gentleman has raised these issues today; he should rest assured that they will be kept under review and that the specific cases he has discussed will be taken into account.

Question put and agreed to.

The Economy

Andrea Leadsom Excerpts

Wednesday 26th November 2014 Commons Chamber

[The Economic Secretary to the Treasury (Andrea Leadsom)]

During this debate we have heard some extraordinary assertions. We have heard that the economic crash of 2008 did not really happen, that we can simply spend, spend, spend our way out of a recession, and that we can somehow be insulated from the global economic outlook. However, British voters are pretty savvy. We cannot pull the wool over their eyes or fool them into thinking that we can go on borrowing and spending for ever. We have to be up front about the facts, so I should like to inject some clarity into the debate. I shall go through the motion point by point.

First, I completely agree with the many Members who said that living standards and fairness were critical to our economic recovery. Labour’s great recession has been tough. Many people have genuinely suffered as a result of the disastrous 5% drop in our nation’s GDP, which was brought about by far too much borrowing in the years before the financial crisis. It is too simplistic to say that working people are, on average, £1,600 a year worse off than they were in 2010. That figure ignores changes in employment. It ignores the big change we have made to cut income tax and duty on household goods. It also ignores the increase in household disposable income.

There is another story to tell, a positive story about how the economy is offering hope and opportunity as it recovers under our reforms. It is a story that involves more people being in work than ever before, and 2 million private sector jobs being created since 2010. It is a story that involves the number of young people on unemployment benefits halving since 2012, and a story that encourages work by ensuring that a typical taxpayer has had their income tax cut by £805 a year, boosting the money that 25 million people take home from work and taking more than 3.2 million of our lower earners out of income tax altogether.

It is this Government, through our long-term economic plan—for which I make no apology—who are creating the right environment for opportunity and aspiration for more people than ever before. Opposition Members have pointed out that many of those jobs are starter jobs for young people, part-time jobs for people getting back into work or self-employed jobs. Well, we on this side of the House applaud those entrepreneurs who are starting a business, who are taking on apprentices and who are offering flexible and part-time jobs to those who need them.

The latest figures show that regular pay rose by 1.8% in September, which is 0.6% above inflation. Workers who are in continuous employment—that is, those who are in the same job that they were in a year ago—saw their average earnings rise by 4.1%, which is more than double the rate of inflation. This is

“the start of real pay growth”,

as Mark Carney put it. Our long-term economic plan is delivering the highest growth in the G7. It was confirmed just yesterday at 3%. It is delivering more business investment than in the peak before the recession and creating a record number of private sector businesses. It has cut the deficit by over a third, and it stands to deliver the first surplus in 18 years by 2018-19.

[Angie Bray (Ealing Central and Acton) (Con)]

My hon. Friend is absolutely right to say that the public will not allow the wool to be pulled over their eyes. Does she agree that every survey imaginable shows that this Government have a very high rating for economic competence, whereas Labour is absolutely nowhere?

[Andrea Leadsom]

My hon. Friend is absolutely right. In particular, our achievements must be seen against the backdrop of our inheriting the toughest economic conditions in living memory.

I do not accept that we have broken our pledge to balance the books; nor do I accept that the recovery has somehow insulated the richest. What total nonsense! The richest are contributing more in income tax than they ever did under Labour, with over 28% of income tax revenue coming from the top 1%. In every single Budget, we have raised revenues from the most well off, and we have used those extra revenues to help the most vulnerable in our society. It is a sad fact that many have been hit hard by this recession, and I know how genuinely difficult many people have found it. We owe it to them not just to improve their living standards through an economic recovery, but to make sure we never get into this mess again. That is why it is all about finding the right balance: between ensuring that those with the broadest shoulders take the biggest burden and ensuring the UK remains internationally competitive and open for business.

This Government have looked to strike the right balance. That is why our above-inflation increase of the adult national minimum wage came into force on 1 October: more than 1 million people benefited from the largest cash increase since 2008 and the first real-terms increase since 2007. On child care for working parents, we are introducing comprehensive support. Under our tax-free child care plans, 20% support for child care costs of up to £10,000 per year for each child will be available. We have also doubled small business rate relief for a further year, helping more than 500,000 small businesses and giving 300,000 local shops, pubs and restaurants a £1,000 discount. We have made infrastructure a top priority—we are setting out a long-term pipeline of infrastructure investment of £383 billion to 2020 and beyond. Housing is a major part of this, and we are investing £7.8 billion to deliver 335,000 new affordable homes.

However, it is not our plan to reinstate the 50p tax rate. That rate was crudely thought out, distortive and economically inefficient. It failed to raise the £2.5 billion Labour claimed it would and it gave a damaging signal that the UK was not open for business. We have instead raised far more from tax changes targeting the richest, including the bank levy, which will raise £8 billion during this Parliament. We have also taken tough measures against tax avoidance: we have closed loopholes; we have clamped down on stamp duty avoidance; we have given Her Majesty’s Revenue and Customs new powers to collect disputed tax; and we have led international tax reforms through the G20.

The motion's final point related to creating new funds for health and care. Since 2010, the Government have increased the NHS budget in real terms every year. Health funding will continue to grow in real terms in 2015-16, which means an additional £2.1 billion for the NHS next year. But a strong NHS needs a strong economy, and our long-term economic plan is designed to provide both.

[Chris Leslie]

The £1 billion from the foreign exchange-rigging scandal is coming in as a windfall. Will the Minister do the right thing and allocate it for the NHS?

[Andrea Leadsom]

As the hon. Gentleman will appreciate, a strong NHS needs a strong economy. In answer to the point raised by the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson) about foreign exchange fines, she is absolutely right to say that we are talking about disgusting, appalling behaviour, which represented extreme arrogance on the part of the bankers who thought they could rig foreign exchange. Our Chancellor decided that those fines for misdoing would no longer go back to reducing the levy for the industry’s own regulation, but would instead be used for the public good. This is a big sum and we intend to think carefully about how we use it, but it will be used for the public good.

Whatever happens, we cannot go back to the bad old days. What a shocking mess we were left with—total economic carnage. The Opposition’s motion, calling for a current budget surplus and falling national debt as soon as possible, shows complete economic illiteracy. They want to keep on borrowing, hiding behind so-called “capital spending”, as if, somehow, one type of borrowing does not count. I do not see how voters can be fooled by that; it is the equivalent of saying, “I will spend my wages on food, clothes and petrol, but if I buy a car or a house, that’s investment and so borrowing to fund it doesn’t count.” It is this Government’s plan that will get our debts under control; eliminate borrowing over time to ensure that our debts fall as a share of GDP; and allow future Governments to respond much more quickly to any economic shocks, while continuing to support individuals and businesses across the country.

We know that the job is far from finished. As storm clouds gather once again over the world’s economies, we need to be clear about the scale of the task that we face. When a country loses control of its finances, it loses control of everything, and it is the poorest who are hit the hardest. Labour’s recession proved that only too clearly. This Government have taken the tough decisions to pull our economy back from the brink and, through our long-term economic plan, to put an economic recovery in place, so now, more than ever, it is a plan that nobody can afford to abandon.

Question put.

Equitable Life

Andrea Leadsom Excerpts

Tuesday 25th November 2014 Written Statements

[The Economic Secretary to the Treasury (Andrea Leadsom)]

As of 31 October 2014, the scheme has now issued payments totalling £990.5 million to 887,061 policyholders. The scheme has published a further progress report, which can be found at: https://www.gov.uk/equitable- life-payment-scheme

The figures are broken down as follows:

409,221 payments to individual investors have been issued totalling £555.2 million.

37,732 initial payments to with-profits annuitants (WPAs) or their estates have been issued by the scheme, totalling £82 million. Subsequent annual payments totalling £187.5 million have also been issued to annuitants.

440,108 payments totalling £165.8 million have been issued to those who bought their policy through their company pension scheme.

There are now approximately 151,000 policyholders who are due a payment but where the scheme has not yet been able to trace or validate their address.

The scheme has gone to significant lengths to trace eligible policyholders. It remains committed to tracing and paying as many eligible policyholders as possible, and will continue to consider all proportionate actions it can take to do this, including working with the Department for Work and Pensions.

The scheme encourages any policyholders who believe themselves to be eligible to call the scheme on: 0300 0200 150. The scheme can verify the identity of most policyholders on the telephone, which means any payment due can usually be received within two weeks.

Money Creation and Society

Andrea Leadsom Excerpts

Thursday 20th November 2014 Commons Chamber

[The Economic Secretary to the Treasury (Andrea Leadsom)]

I too congratulate hon. Members on securing this fascinating debate. It is long overdue and has allowed us to consider not just what more we can do to improve what we have but whether we should be throwing it away and starting again. I genuinely welcome the debate and hope that many more will follow. In particular, I pay tribute to my hon. Friend the Member for Wycombe (Steve Baker), who now sits on the Treasury Committee on which I had the great honour to serve for four years. I am sure that his challenge to orthodoxy will have been extremely welcomed by the Committee and by many others. I wish him good luck on that.

[Steve Baker]

May I just say how much I am enjoying my hon. Friend’s place on the Committee? I congratulate her on her promotion once again.

[Andrea Leadsom]

I am grateful to my hon. Friend.

My right hon. Friend the Member for Hitchin and Harpenden (Mr Lilley) gave a fantastic explanation that I would commend to anybody who wants to understand how money is created. He might consider delivering it under the financial education curriculum in schools. It was very enlightening, not least because it highlighted the appalling failure of regulation in the run-up to the financial crisis that is still reverberating in our economy today. All hon. Members made interesting points on what we can do better and whether we should be thinking again. I pay tribute to the right hon. Member for Oldham West and Royton (Mr Meacher) for his good explanation of the Positive Money agenda, which is certainly an idea worthy of thought and I will come on to it.

Money creation is an important and complex aspect of our economy that I agree is often misunderstood. I would therefore like quickly to set out how the system works. The money held by households and companies takes two forms: currency, which is banknotes and coins, and bank deposits. The vast majority, as my hon. Friend pointed out, is in the form of bank deposits. He is absolutely right to say that bank deposits are primarily created by commercial banks themselves each time they make a loan. Whenever a bank makes a loan, it credits the borrower’s bank account with a new deposit and that creates “new money”. However, there are limits to how much new money is created at any point in time. When a bank makes a loan, it does so in the expectation that the loan will be repaid in the future—households repay their mortgages out of their salaries; businesses repay their loans out of income from their investments. In other words, banks will not create new money unless they think that new value will also in due course be created, enabling that loan to be paid back.

Ultimately, money creation depends on the policies of the Bank of England. Changes to the bank rate affect market interest rates and, in turn, the saving and borrowing decisions of households and businesses. Prudential regulation is used if excessive risk-taking or asset price bubbles are creating excessive lending. Those checks and balances are an integral part of the system.

I agree fully that the regulatory system was totally unfit in the run-up to the financial crisis. We saw risky behaviour, excessive lending and a general lack of restraint on all sides. The key problem was that the buck did not stop anywhere. When there were problems in the banking system, regulators looked at each other for who was responsible. We all know that the outcome was the financial crisis of 2008. I, too, see the financial crisis as a prime example of why we need not just change but a better banking culture: a culture where people do not spend their time thinking about how to get around the rules; a culture where there is no tension between what is good for the firm and what is good for the customer; and a culture where infringements of the rules are properly and seriously dealt with.

I will touch on what we are doing to change the regulations and the culture, but first I will set out why we do not believe that the right solution is the wholesale replacement of the current system by something else, such as a sovereign monetary system. Under a sovereign monetary system, it would be the state, not banks, that creates new money. The central bank, via a committee, would decide how much money is created and this money would mostly be transferred to the Government. Lending would come from the pool of customers’ investment account deposits held by commercial banks.

Such a system would raise a number of very important questions. How would that committee assess how much money should be created to meet the inflation target and support the economy? If the central bank had the power to finance the Government’s policies, what would the implications be for the credibility of the fiscal framework and the Government’s ability to borrow from the market if they needed to? What would be the impact on the availability of credit for businesses and households? Would not credit become pro-cyclical? Would we not incentivise financing households over businesses, because for businesses, banks would presumably expect the state to step in? Would we not be encouraging the emergence of an unregulated set of new shadow banks? Would not the introduction of a totally new system, untested across modern advanced economies, create unnecessary risk at a time when people need stability?

[Steve Baker]

I do not actually support Positive Money’s proposals, although I am glad to work with it because I support its diagnosis of the problem. Of course, this argument could have been advanced in 1844 and it was not. I have not proposed throwing away the system and doing something radically new; I have proposed getting rid of all the obstacles to the free market creating alternative currencies.

[Andrea Leadsom]

I am grateful to my hon. Friend for pointing that out. I must confess that before the debate I was puzzled that such an intelligent and extremely sensible person should be making the case for a sovereign monetary system, which I would consider to be an extraordinarily state-interventionist proposal. I am glad to hear that is not the case. In addition, of course, bearing in mind our current set of regulators, presumably we would then be looking at a committee of middle-aged, white men deciding what the economy needs, which would also be of significant concern to me.

[Mr Meacher]

Before the Minister leaves the question of a sovereign monetary system, which she obviously totally opposes and to which she raised several objections that I cannot answer in an intervention, does she not believe that the system of bank money creation is highly pro-cyclical and has enormously benefited property and financial sectors to the disadvantage of the vast range of industries outside the financial sector?

[Andrea Leadsom]

As I said, I sincerely congratulate the right hon. Gentleman on raising this matter; it is certainly worthy of discussion, and I look forward to him responding to some of my arguments. I agree that where we were in the run-up to the financial crisis was entirely inappropriate, and I will come to some of the steps we have taken to improve—not throw away the baby with the bathwater—what we have now, rather than throwing it away and starting again.

I know that some of my hon. Friends and Opposition Members have a particular concern about quantitative easing—I have made it clear that I do too—specifically about how we might unwind it. However, they must agree that at least it can be unwound, unlike the proposal for “helicopter money”, which would seem to be a giant step beyond QE—a step where money would be created by the state with no obvious way to rein it back if necessary.

If the tap in my bathroom breaks, rather than wrenching the sink off the wall, I would prefer to fix the tap. As Martin Wolf said last week,

“nobody can say with confidence”

how a monetary system should be structured and what laws and regulations it should have. Given that and the economic tumult across the world, we should be devoting our energies to fixing the system we have—mending the problems but keeping what works. For that reason, the Government have taken significant steps to improve the banking sector, making sure it fulfils its core purpose of keeping the wheels of the economy well oiled.

We are creating a better, safer financial system, with the Financial Policy Committee, created in this Parliament, focused on macro-prudential analysis and action. As the hon. Member for Newcastle upon Tyne North (Catherine McKinnell) pointed out, the FPC has been given counter-cyclical tools to require more capital to be held and to increase the leverage ratio and the counter-cyclical capital buffers when the economy is over-exuberant in order to push back against it—as the previous Governor of the Bank of England said, to remove the punch bowl while the party is still in full flow. That is incredibly important. We are also reducing dependence on debt. Since the financial crisis, the UK banking system has been forced significantly to strengthen its capital and liquidity position, and it is continuing to do so.

I must stress, however, that regulation alone will never be enough, which is why the Government are promoting choice, competition and diversity. I am delighted that 25 new banks are talking to the Prudential Regulatory Authority about getting a bank licence. We are also making strong efforts to promote the mutual sector; to enhance the capacity of credit unions to serve the real economy better; to enable booster funding for small businesses; to help families; and to improve customer service. We have put in place schemes to help the transmission of money from banks to customers, including the funding for lending scheme, which has lowered the price and increased the availability of credit for small and medium-sized businesses. As I think the hon. Member for Newcastle upon Tyne North said, we have also created the British business bank, which is helping finance markets work better for small firms, and are investing much resource and effort to build that up and help businesses in our economy.

We also have a programme of measures to increase competition in the SME lending market, including flagship proposals to open up access to SME credit information, which will help challengers to get in on the act, and to have banks pass on declined applications for finance to challenger banks. In addition, we now have an appeals process whereby small businesses turned down for funding can get a second chance, which has secured an additional £42 million of lending since its launch. These are all measures to help small businesses access finance. Then, to mitigate the problem of house price bubbles, we are putting in place supply-side reforms to promote home building and home owning, as well as measures enabling the PRA to limit the amount of lending that households can take on.

I agree with Members on both sides of the House, however, that we should not be content with the system as it stands. We must seek to improve it and make it function better. In Mark Carney, we have an excellent central banker who has the experience and knowledge to put the right reforms in place and see them through. As he says:

“Reform should stop only when industry and society are content, and finance justifiably proud.”

In the medium to long term, we need to create a culture where research and analysis do not shy away from going against the orthodoxy. As hon. Members across the House have said, we need to consider alternatives, and we should be having that discussion; it is healthy to do so, because that is how to make progress. For that reason, the call from Andy Haldane, the Deputy Governor of the Bank of England, for a broader look at new and existing monetary ideas is exactly right.

[Mr Meacher]

I am pleased the Minister thinks that alternative ways of improving the monetary system should be explored. Will she support the idea of a setting up a commission to examine the alternatives, as recommended by the hon. Member for Richmond Park (Zac Goldsmith), as well as by me—so there is some cross-part support on this? Is that not an idea whose time has come?

[Andrea Leadsom]

I think that an organisation such as the Treasury Committee, of which my hon. Friend the Member for Wycombe is a member, would be entirely the right place to have such a discussion, and of course we also had the Vickers commission, which looked at what went wrong and what measures could be put in place, and the Parliamentary Commission on Banking Standards, which specifically addressed the issue of incentives and motivations in banking. I would not normally advocate the establishment of great new commissions; we already have the bodies to look further at different orthodoxies, and as Andy Haldane has said, the Bank itself will be looking at, and encouraging, the exploration of alternative views.

Of course, we also need to continue embracing innovation, both in the “software” of how payments are made and in the “hardware” of new currencies, such as crypto-currencies and digital currencies—both could open up competition and give customers greater choice and access to funding—but we must do so with caution. In November, we published a call for information inviting views and evidence on the benefits and risks of digital currencies so that digital currency businesses can continue to set up in the UK and people can expect to use them safely.

I am the last person who could be described as statist, but I accept that we must always be ruthless in our determination to regulate new ideas that come to the fore, because as sure as night follows day, as new ideas come in, through shadow banking, new lending ideas and so on, some people will seek to manipulate new schemes and currencies for fraudulent purposes. I am absolutely alive to that fact. It is important, therefore, that the Government carry out the necessary research.

The Government believe that the current system, modified and improved with far greater competition, can service the economy best. However, reform is vital. Again as Andy Haldane puts it:

“Historically, flexing policy frameworks has often been taken as a sign of regime failure. Quite the opposite ought to be the case”.

We need banks to lend—to young families wanting to buy houses and repay out of future labour income rather than relying on the bank of mum and dad, and to businesses wanting to seize opportunities, gain new markets and create jobs and growth. We have an existing system that offers a forward-looking and dynamic framework in which tomorrow’s opportunities are not wholly reliant on yesterday’s savings and which builds on banks’ expertise in assessing risk and making the lending decisions we badly need. During my 25 years at the heart of the industry, I saw the sector at its best, but sometimes sadly also at its worst. We are trying to remedy the worst, but let us also keep the best.

Treasury

Andrea Leadsom Excerpts

Tuesday 11th November 2014 Ministerial Corrections

[Andrea Leadsom]

I did not. I am sorry—I must have missed the hon. Lady’s request on that point. To the extent to which larger credit unions are offering current accounts, which I defined as carefully as I could in my opening remarks, they will be captured by the legislation.

[Official Report, Fifth Delegated Legislation Committee, 5 November 2014; c. 11.]

Letter of correction from Andrea Leadsom:

An error has been identified in the response given to the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson) in the Fifth Delegated Legislation Committee debate on 5 November 2014.

The correct response should have been:

[Andrea Leadsom]

I did not. I am sorry—I must have missed the hon. Lady’s request on that point. To the extent to which larger credit unions are offering current accounts, which I defined as carefully as I could in my opening remarks, they will not be captured by the legislation

Financial Policy Committee(Leverage Ratio Framework)

Andrea Leadsom Excerpts

Friday 7th November 2014 Written Statements

[The Economic Secretary to the Treasury (Andrea Leadsom)]

The Government have today published a consultation on granting the independent Financial Policy Committee (FPC) new powers over a leverage ratio framework for UK banks, building societies and investment firms.

On 26 November 2013, the Chancellor wrote to the Governor asking that the FPC undertake a review of the leverage ratio and its role in the regulatory framework. On 11 July 2014, the FPC published a consultation paper setting out its initial proposal for a leverage ratio framework and sought the views of the industry. On 31 October 2014, following almost a year of work and extensive consultation with stakeholders, the FPC published its response, the Review of the Leverage Ratio. The review recommended that the FPC be given new powers of direction over the leverage ratio framework for the UK banking sector. Specifically, the review recommended that the FPC should have a power of direction to set:

The minimum leverage ratio requirement to be set at 3%;

The supplementary leverage ratio buffer rate to be set as a proportion of the systemic

risk-weighted capital buffers using a scaling factor of 35%; and

The countercyclical leverage ratio buffer rate to be set as a proportion of the countercyclical capital buffer rates using a scaling factor of 35%.

In response to this recommendation by the FPC, the Government are consulting on legislating to give the FPC powers of direction over leverage ratio requirements. Currently, the FPC can only make recommendations in relation to these tools.

The consultation that has been published today contains draft secondary legislation that will provide the FPC with the new powers of direction. The Treasury seeks responses to the consultation by 28 November 2014, in advance of laying the secondary legislation before Parliament in early 2015.

The consultation document The Financial Policy Committee leverage ratio framework has been published on the Gov.uk website and found using the following link:

https://www.gov.ukgoverment/consultations/financial-policy-committees-leverage-ratio-framework.

Oral Answers to Questions

Andrea Leadsom Excerpts

Tuesday 4th November 2014 Commons Chamber

[Stephen Timms (East Ham) (Lab)]

11. What recent forecast he has made of the change in the deficit between May 2010 and May 2015.

[The Economic Secretary to the Treasury (Andrea Leadsom)]

In 2010 the Government inherited the largest deficit since the second world war at 10.2% of GDP. We have made substantial progress in reducing the deficit since 2010. By the end of the last financial year 2013-14, the deficit had fallen from £149 billion to £95.6 billion, estimated at Budget 2014. As a share of GDP that is a fall of more than a third from its peak.

[Stephen Timms]

The Chancellor’s promise to eradicate the deficit in this Parliament has long since been abandoned, but with the deficit going up in the first half of this financial year, the scaled-back aim of halving the deficit by the end of this Parliament looks in serious trouble as well. The Chief Secretary has just attacked the unfunded tax cuts that the Chancellor announced. Does the Minister still think that the tax deficit will even be halved by the end of the current financial year?

[Andrea Leadsom]

The right hon. Gentleman is possibly being a little mischievous. As a veteran Chief Secretary to the Treasury from the previous Government, he should well understand that, according to the OBR’s comments and looking at its 2010 forecast errors over time, the biggest difference between 2013 and earlier was the lack of external shock. In 2011, high commodity prices ate into disposable incomes and the euro area crisis damaged credit and confidence. He should well understand why the deficit reduction was impacted by external shocks.

[Andrew Bridgen (North West Leicestershire) (Con)]

According to the International Monetary Fund’s “World Economic Outlook”, the UK is set to grow at rates that will put other major European economies to shame. What measures does the Minister believe have allowed that out-performance of our European partners?

[Andrea Leadsom]

My hon. Friend is quite right. The UK is now growing at the fastest rate in the G7 and, indeed, is forecast to grow at the fastest rate in the G20. That is the result of our long-term economic plan—reducing business tax rates in order to get more people into work; more people paying their taxes and more people able to bring home a wage. That long-term economic plan is what is bringing our economy back into growth.

[Mr Steve Reed (Croydon North) (Lab)]

12. How many working people are in receipt of tax credits.

--- Later in debate ---

[Mr David Burrowes (Enfield, Southgate) (Con)]

16. What assessment he has made of recent trends in the level of employment.

[The Economic Secretary to the Treasury (Andrea Leadsom)]

A record 30.76 million people are in employment. Since the coalition came to power, employment has increased by more than 1.7 million. Over 2 million private sector jobs have been created since early 2010, meaning that for every public sector job lost, over five have been created in the private sector.

[Mr Burrowes]

Can the Minister help my constituents, who are pleased by the record number of people in jobs in my constituency but confused by the Leader of the Opposition’s claim that our plan would mean the loss of 1 million jobs, and concerned about the impact that Labour’s pledges of more spending, more borrowing and higher taxes would have on jobs in my constituency?

[Andrea Leadsom]

My hon. Friend is right to point out that irony. Under this Government, we have just seen the biggest drop in unemployment ever. In particular, long-term unemployment and youth unemployment are dropping fast, giving hope, prospects and a decent wage to so many in our country. We should be celebrating these things and definitely not letting Labour put them in jeopardy.

[Helen Jones (Warrington North) (Lab)]

Twenty per cent. of my constituents earn less than the living wage. People are working at two or three jobs and still cannot make ends meet. When is the Minister going to recognise that her so-called vaunted increase in employment is based on people earning poverty wages?

[Andrea Leadsom]

I completely refute what the hon. Lady says. A lot of the particularly big increases in employment have been among very young and older workers, who tend to earn less, but is not that great news for the longer-term prospects of those young people, who are off the unemployment register and developing skills for the future?

[Stephen Metcalfe (South Basildon and East Thurrock) (Con)]

17. What progress he has made on measures to reduce taxes on pensions.

--- Later in debate ---

[Caroline Dinenage (Gosport) (Con)]

May I urge the Chancellor to support the Secretary of State for Business, Innovation and Skills in calls for banks not to shut the last branch in a town? HSBC is about to shut its last branch in Lee-on-Solent, leaving businesses with no banking support at all.

[The Economic Secretary to the Treasury (Andrea Leadsom)]

My hon. Friend makes an important point. Many people are concerned about bank closures. I recently had a round table with a number of banks and challenger banks to discuss the issue, not least the change towards mobile and telephone banking. We are certainly looking closely at the matter.

Financial Policy Committee (Housing Market Tools)

Andrea Leadsom Excerpts

Thursday 30th October 2014 Written Statements

[The Economic Secretary to the Treasury (Andrea Leadsom)]

The Government have today published a consultation on granting the independent Financial Policy Committee new powers over the UK’s housing market.

In his Mansion House speech on 12 June 2014 the Chancellor committed to ensuring that the FPC has,

“all the weapons it needs to guard against risks in the housing market.”

He announced his intention to give the FPC,

“new powers over mortgages, including over the size of mortgage loans as a share of family incomes or the value of the house.”

He said that the Treasury would consult on the tools, and that they would be in place before the end of this Parliament.

In response to the Chancellor’s announcement, on 2 October 2014, the FPC recommended that it be granted the power to direct the Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA) to require regulated lenders to place limits on owner-occupied and buy-to-let mortgage lending by reference to:

Loan-to-value (LTV) ratios; and

Debt-to-income (DTI) ratios, including interest coverage ratios (ICR) in respect of buy-to-let lending.

In response to this recommendation by the FPC, the Government are consulting on legislating to give the FPC powers of direction over LTV limits and DTI limits in respect of owner-occupied mortgages. Currently, the FPC can only make recommendations in relation to these tools. The Government intend to consult separately in 2015 on the FPC’s recommendations that it be granted powers of direction in respect of the buy-to-let mortgage market, with a view to building an in-depth evidence base on how the operation of the UK buy-to-let housing market may carry risks to financial stability.

The consultation that has been published today contains draft secondary legislation that will provide the Financial Policy Committee with the new powers of direction. The Treasury seeks responses to the consultation by 28 November 2014, in advance of laying the secondary legislation before Parliament in early 2015.

Copies of the consultation document The Financial Policy Committee’s housing market tools have been deposited in the Libraries of both Houses and published on the HM Treasury website.

Infrastructure Investment (Stroud)

Andrea Leadsom Excerpts

Tuesday 21st October 2014 Westminster Hall

[The Economic Secretary to the Treasury (Andrea Leadsom)]

Thank you, Mr Hollobone, for calling me to speak. I am delighted to be here in Westminster Hall today, and I congratulate my hon. Friend the Member for Stroud (Neil Carmichael) on securing this debate.

The quality of a nation’s infrastructure is one of the foundations of its growth and, of course, the living standards of its people, so ensuring that Britain has first-class infrastructure is a crucial part of our long-term economic plan, supporting businesses, creating jobs and providing a better future for all our citizens.

We need to equip the UK to compete on the global stage by giving businesses the infrastructure they need to thrive. That is why the Government have put long-term investment in transport, energy, telecommunications, flood defences and intellectual capital at the heart of our growth plan. Because of the tough decisions we have taken in day-to-day spending, we can prioritise public investment where it is most needed and create the right conditions for private investment in infrastructure, where such investment can bring value for the taxpayer.

The national infrastructure plan sets out the Government’s strategy for delivering the infrastructure that the UK will need during the next decade and beyond. Our intention is to improve further our approach to planning, financing and delivering this critical economic infrastructure as we go through a significant period of renewal. We have outlined a pipeline of projects and programmes worth more than £380 billion, and in the Budget we published further analysis of how we expect that pipeline to be financed. That work builds on the long-term funding settlements we have already announced for sectors such as roads, rail and flood defences, and the steps that we have taken to support private sector investment.

The national infrastructure plan not only sets out the Government’s decisions as to what infrastructure our country will need during the next decade and beyond but sets out our strategy for how we will bring that infrastructure about. It lays out how the pipeline of projects will be financed, building on both the long-term public funding settlements that we have already announced —£100 billion of capital investment in projects during the next Parliament—and the steps that we have already taken to support private sector investment, for example through the creation of the UK guarantees scheme and by ensuring the independence of our regulators for key utility sectors. It also lays out the action that we have taken to strengthen planning, whereby a number of improvements have helped to take the number of planning approvals to a 13-year high.

We are continuing to streamline the system, including through the new specialist planning court for infrastructure, which opened in April, and the measures published in the Infrastructure Bill. The national infrastructure plan also lays out the action that we are taking on delivery, to make sure that we have the capability in the public sector to deliver projects on time, on budget and to specification. That also means having delivery bodies with the right structure to provide the autonomy and operational flexibility that are necessary to ensure success. Corporatisation of the Highways Agency will provide that in the roads sector, where we are about to see the biggest programme of investment since the 1970s.

We are already making big progress. Major infrastructure projects are now being completed, including major improvements at Reading station, smart motorways to relieve congestion up and down the country, and a new terminal 2 at Heathrow to enhance our international connectivity. In fact, more than 2,000 infrastructure projects and improvements have been completed over the last four years.

In this financial year alone, more than 200 projects are due to start and another 200 are due to complete, and that will directly support over 150,000 jobs in the construction industry. These projects are part of £36 billion of investment planned for 2014-15.

The Government are taking steps to ensure that the benefits of investment in infrastructure are distributed across the country to generate growth, create jobs and help rebalance the economy. The south-west region is no exception, with more than £18 billion of planned investment in the published infrastructure pipeline across 31 different projects and programmes. This investment includes a number of key projects within the Government’s top 40 priority infrastructure investments, including Hinkley Point C, the first new nuclear power station in a generation, and the Great Western rail electrification—my hon. Friend knows that work is currently under way to improve one of Britain’s oldest and busiest railways. Other projects include the A380 Kingskerswell bypass, which is currently in construction; the expansion of the National Composites Centre in Bristol as part of the Government’s science and innovation catapult programme; supporting the roll-out of superfast broadband with more than 6,500 premises now passed by the south Gloucestershire and Wiltshire broadband scheme; and the designation of Bristol as a super-connected city.

I, too, welcome the completion of the redoubling of the track from Swindon to Kemble. This key piece of infrastructure will support our wider ambitions to electrify the Great Western main line, significantly improving connectivity for the south-west. I congratulate my hon. Friend on his persistence in making the case for this work. I am sure that it will make a positive contribution to those living and working in his area. I confirm that it was indeed extra cash found by this Government in its very first Budget that enabled the Swindon to Kemble line improvements to go ahead.

Along with my hon. Friend, I welcome the local growth funding provided to the Gloucestershire local enterprise partnership to convert the redevelopment of Berkeley power station to provide a training centre for science, technology, engineering, and maths skills. This is just part of £62.5 million provided to the local enterprise partnership by central Government, and it will bring forward at least £80 million of additional investment from local partners and the private sector.

I thank my hon. Friend for his active engagement with the local community and am interested to hear his further ideas for infrastructure improvements in the Stroud valleys and vale area. He can rest assured that I will write straight away to my ministerial colleagues in the Department for Transport, asking that they provide an update on his proposals for a new station at Stonehouse, an additional Severn crossing at Sharpness, a solution to congestion on the A417 and improvements to the M5 at junction 14.

In the meantime, I hope that both he and I can agree that the Government should continue to focus on their existing commitment to deliver key infrastructure schemes throughout the country, including in the south-west.

Banking Act 2009 (Report)

Andrea Leadsom Excerpts

Thursday 16th October 2014 Written Statements

[The Economic Secretary to the Treasury (Andrea Leadsom)]

The Treasury has laid before the House of Commons a report required under section 231 of the Banking Act 2009 covering the period from 1 October 2013 to 31 March 2014. Copies of the document are available in the Vote Office and the Printed Paper Office.