Finance (No. 2) Bill
Andrew Love Excerpts(9 years, 1 month ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mr Gauke
He does. I am sure he was a very young man at the time. Under a great deal of pressure, Hugh Gaitskell ruled out all sorts of tax increases and at the same time made all sorts of promises about public spending. The British people rumbled the Labour party in 1959 and did not believe that that was a credible position. As a consequence, they returned a Conservative Government with an even bigger majority. Labour Members might want to be a bit careful about drawing parallels with 1959.
Mr Love
As we are talking about rumbling the Government, the election will be an opportunity to scrutinise the Chancellor’s claim about the £30 billion of savings. He has said there will be £12 billion savings from welfare reform but has indicated how only £3 billion will be found. He has said he will get £5 billion from anti-evasion and avoidance measures, but has indicated where only £3 billion of that will come from. There is still a huge credibility gap. Will the Minister help us with it?
Mr Gauke
I will tell the hon. Gentleman where the credibility gap is. Labour Members effectively voted for a £30 billion target. They then denied it. They now will not indicate what adjustments they will undertake in 2016-17 and 2017-18. They have not said how they will reduce departmental spending, or how, or whether, they will reduce welfare spending. They have not said how much they will raise from tax. If they will not give us answers to those questions, we can only assume that it is because they intend to tax and borrow more. If they will not provide clarity on that, we will make that point time and again.
Mr Gauke
I share the view that we need to build more houses in this country, but I am pleased that last year housing starts were at a record high for seven years or so, that planning permissions are going up, and that we have reformed planning law to enable more houses to be built. In the Budget last week, there were details of 20 housing zones that could support something like 45,000 homes. That is consistent with a desire to ensure greater opportunity for people to acquire their own home.
It is also worth pointing out that in last week’s Budget we introduced Help to Buy individual savings accounts, which will enable people to acquire deposits so that they can enter the housing market. In terms of continuity, I would not necessarily be proud of everything connected with the Conservative Government of the 1950s. I absolutely think we need to do more to get more people into the housing market, and this Government are delivering on that and we are definitely moving in the right direction.
Mr Gauke
It should be noted that the Office for Budget Responsibility does not believe that any of the measures announced last week will feed through to higher house prices. We also announced supply-side policies and 20 housing zones last week. It is right that we take steps to support supply.
The hon. Gentleman said that I was being generous with my time, but I am conscious that I am also being generous with the Committee’s time, so let me make a little progress. To return to the point made by the hon. Member for Telford (David Wright), the VAT increase in 2010 applied only to the standard rate. Everyday essentials such as food and children’s clothing, as well as newspapers and printed books, have remained zero-rated throughout this Parliament, which protects those on low and middle incomes. On fairness, we have reduced income tax for more than 27 million individuals, with basic rate taxpayers £905 better off in cash terms compared with 2010.
There is no need to publish a report on the impacts of the rise in VAT announced in 2010—a rise that, after all, the Labour party did not oppose. The Government’s economic record speaks for itself: record employment in the UK against virtually record unemployment in France. By 2017, basic rate taxpayers will be £905 better off in cash terms compared with 2010, and 3.7 million individuals with low incomes will have been taken out of income tax altogether. The European Union’s own analysis describes UK living standards as the fourth highest in the EU, above those of France, Italy, Spain, Ireland and the Netherlands.
We have delivered sustainable economic growth while across the EU economies stagnate, but we recognise that the job is not finished. This Government continue to take the difficult decisions needed to secure a responsible recovery and stay on course to prosperity. I therefore hope that the Labour party will not press new clause 1 and that clauses 66 and 67 will stand part of the Bill.
Finance (No. 2) Bill
Andrew Love Excerpts(9 years, 1 month ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Financial Secretary to the Treasury (Mr David Gauke)
I beg to move, That the Bill be now read a Second time.
Finance Bill 2015 takes another step forward in this Government’s long-term economic plan. As my right hon. Friend the Chancellor set out in last Wednesday’s Budget statement, we have grown faster than any other major advanced economy in the world; more people have jobs in Britain than ever before; and the standard of living is rising and set to rise further. We are cleaning up the economic mess we inherited in 2010 and delivering a fairer economy for all.
This Bill will build on that success. It will help British businesses to invest and create jobs, help British households to work and save, and help ensure everyone in Britain pays their fair share of tax.
Mr Andrew Love (Edmonton) (Lab/Co-op)
That will also have the effect of increasing complexity in the taxation system. Whatever happened to the tax simplification project?
Mr Gauke
We have established the Office of Tax Simplification and put in place a large number of its recommendations. I could spend some time talking Members through some of them. It is also worth pointing out that just last week the Chancellor of the Exchequer announced plans to take very large numbers of people out of having to pay income tax on their savings, reducing the need for them to be in the self-assessment system. Indeed, we have set out longer-term plans to simplify the operation of the tax system through a more digitised system with online tax accounts, which will make a substantial difference to many people. I should also point out that from April of this year we will have one rate of corporation tax, which means that we no longer need a marginal rate with some 50,000 businesses having to calculate what to pay in a more complicated way. The Government have taken a number of steps on tax simplification.
We are committed to all the tax measures that the Chancellor set out last Wednesday, but appreciating the constraints on the timetable we have deliberately held a number of measures back and published a shorter Bill than would otherwise have been the case. Unlike under previous Governments, legislation for Finance Bills since 2011 has been published in draft three months ahead of the final publication of the Bill. Under this new approach, we published more than 250 pages of draft legislation in December for technical consultation, again meeting our commitment to expose legislation in draft.
We are proceeding today on the basis of consent. The Opposition required us to remove five clauses from the Bill following discussions last week. The clauses concern a new tax exemption for the travel expenses of members of local authorities; a new statutory exemption from income tax for trivial benefits in kind, implementing a recommendation of the Office of Tax Simplification’s review of employee benefits and expenses; simplifying link company requirements for consortium claims under corporation tax; a separate rate of excise duty for aqua methanol; and changes to scheme rules for the enterprise investment scheme and venture capital trusts. The Government would look to legislate on all five of those clauses at the earliest opportunity at the start of the new Parliament.
I will happily take further interventions this afternoon, but let me first set out the order in which I intend to discuss the measures in the Bill. I will begin by talking about those that will boost growth and enterprise. Next, I will cover those that tackle avoidance and aggressive tax planning and then I will cover those that help families and savers do more with the money they earn. Finally, I will talk about how the Bill, like previous Finance Acts in this Parliament, will help to deliver a simpler tax system.
Let me begin with the measures designed to boost growth and encourage enterprise. Hon. Members will be aware that our long-term economic plan is working and confidence is returning to businesses and our markets, but that growth would not have been possible without the hard work of businesses up and down the country. During our five years in office, we have created the right environment to help businesses start, grow and succeed. When we came to office, Britain had one of the least competitive business tax regimes in Europe. Now it is the most competitive. Next week, corporation tax will be cut to 20%, one of the lowest rates of any major economy in the world. By 2016, that will mean £9.5 billion savings for businesses across the UK every year. That is why more and more businesses are moving operations here, starting up here or growing here.
The Bill will also bolster support for research and development and the creative sector. We are increasing the research and development tax credit for small and medium-sized enterprises from 225% to 230%, increasing the rate of film tax relief to 25% for all expenditure and introducing a new children’s television tax relief. I am sure those are industries that Members on both sides of the House will support.
The Government will not sit back and let hundreds of thousands of jobs be put at risk thanks to falling oil prices. The Bill recognises the importance of the future of the North sea oil and gas industry, our largest industrial sector. With effect from the start of next month, the Bill introduces a single, simple and generous tax allowance to stimulate investment at all stages of the industry, giving investors early certainty for their long-term investment decisions. We are also cutting petroleum revenue tax from 50% to 35% to encourage continued production in older fields. Backdated to the beginning of January this year, as announced by my right hon. Friend the Chancellor last week, the Bill also cuts the supplementary charge from 32% to 20%.
Mr Gauke
My hon. Friend makes a very good point. Indeed, that is why the previous Chancellor of the Exchequer, the right hon. Member for Edinburgh South West (Mr Darling), made it clear that the bank bonus levy could only really be effective for one year. It is important that we have something sustainable that can exist for much longer.
Mr Gauke
My hon. Friend—given his background, he is an expert in tax matters—has been a consistently strong advocate of taking tough action in this area. I can certainly reassure him that one of our very important strands of work has been to take on the promoters of tax avoidance schemes. Indeed, we are bringing in measures to place greater burdens on them to disclose the position they are in, as well as greater surveillance and supervision of them. During this Parliament, we have seen a dramatic fall in the number of tax avoidance schemes being promoted, which is very good news. There has been a real change in the climate, driven not least by the action that the Government have taken. I believe that we have a very proud record in dealing with tax avoidance and the causes of tax avoidance.
Mr Love
I thank the hon. Gentleman for being so generous with his time. The Chancellor has indicated that, if he is returned to government, he will look for £5 billion of savings from evasion and avoidance; yet in its Budget report, the Office for Budget Responsibility could find only just over £3 billion of savings among the Chancellor’s provisions, which leaves a gap. Will the Financial Secretary explain to the House how he intends to fill that gap during the next Parliament?
Mr Gauke
Given this Government’s record on the measures introduced in Finance Act after Finance Act, the support provided to Her Majesty’s Revenue and Customs in additional powers and resources for this area and the fact that yield has increased very substantially during this Parliament—from £17 billion in 2010 to £26 billion now—we are confident that further savings can be found. Through a combination of measures dealing with tax evasion, tax avoidance and aggressive tax planning, we believe that £5 billion can be found.
I now turn to how the Bill will help hard-working families. This Government have a proud record of reducing tax for the lowest-paid. Not only will the Bill deliver our commitment to raise the income tax personal allowance to £10,600 from the start of the new tax year, but it will legislate to raise it to £10,800 in 2016-17 and to £11,000 in 2017-18. By 2017, a standard rate taxpayer will be £900 better off than under the previous Government’s plans and an individual on the national minimum wage working up to 30 hours a week will not pay any income tax whatsoever. That is a tax cut for 27 million people, and it means that this Government have taken almost 4 million of the lowest-paid out of income tax altogether.
We are passing on the full gains of that policy, so for the first time in seven years, the threshold at which people pay the higher tax rate will rise not just in line with inflation, but above inflation. It will rise from £42,385 this year to £43,300 by 2017-18. Under the Bill, the rate of the new transferable tax allowance for married couples will rise to £1,100, providing help for more than 4 million couples. We are legislating to exempt children from air passenger duty so that, together with measures introduced in the Finance Act 2014, a family of four flying to Australia will now save £194. The Government have made clear their commitment to support households in the UK and to put more of their hard-earned money back in their pockets, where it belongs.
Finally and briefly, I turn to tax simplification, which was touched on earlier. Under this Government’s new approach to tax policy making, we published more than 250 pages of draft legislation in December for technical consultation. As such, the majority of measures contained in the Bill have been drawn up following lengthy consultation with interest groups and businesses. The Bill continues to build on the excellent work of Michael Jack and John Whiting at the Office of Tax Simplification, and it includes a package of measures that will help to simplify tax administration for businesses in several ways.
Mr Love
According to the Financial Times this morning, the Bill will add significantly to the complexity to the tax code. The number of pages in Tolley’s is going up and up. We are told that we now have the longest tax code in the world, having overtaken India some years ago, but the Financial Secretary is presenting this as if it were a simplification. This is contrary to the entire thrust of public debate on these issues. When will we get some tax simplification?
Mr Gauke
The hon. Gentleman may be interested to hear, or he may already be aware, that the Office of Tax Simplification has looked at what constitutes complexity within the tax system. One conclusion that it reached was that the number of pages in the tax code is not a particularly good barometer of complexity. For example, the rewriting of the tax code that occurred over many years lengthened it, but the intention was to make it simpler to understand.
I would make this challenge to the hon. Gentleman: which elements of the Bill would he not want? For example, there are 40 or so pages on oil and gas tax reform, which I believe all parties recognise is a necessary response to the current circumstances, but that will lengthen the tax code. A number of pages are being added to the tax code because of the diverted profits tax, but all parties recognise the need for such a tax to deal with artificially contrived arrangements. I appreciate his point and the spirit in which he makes it and I share the desire for greater tax simplification, but there are some challenges in that for a Government who also want to deal with avoidance and ensure that we have a competitive tax system for the oil and gas sector.
Chris Leslie
This is always the dilemma. Do Government Members not understand—is it just a question of ignorance?—or have they just turned a blind eye? My hon. Friend has been a diligent campaigner against the bedroom tax and has managed to articulate very successfully the harm and difficulties that people have encountered, particularly those with disabilities who need the extra space in the house. Again, that should have been covered in the Bill.
Chris Leslie
Many studies suggest that it costs more than has been raised. Of course, the Government knew how unpopular the bedroom tax would be and came up with their “discretionary fund” to allow local authorities to ameliorate the impact, but it has not been enough and has certainly not been extended to many people who need it. My hon. Friend the Member for Wythenshawe and Sale East (Mike Kane) will also note that there has been no guarantee that the fund will continue into future years. The Government are hoping that this will go away and that nobody will notice, but our constituents will notice.
Ian Swales (Redcar) (LD)
For someone who did not feel that we had been given enough time today, the hon. Member for Nottingham East (Chris Leslie) made an incredibly long speech.
I welcome the measures in the Budget, especially those benefiting business, and I am not the only one. At a lunch event on Friday, I spoke to members of the North East Chamber of commerce, and they also welcomed the Budget—particularly the measures involving oil and gas, which are very important for manufacturing industry and contractors in the north-east. The moves on corporation tax and support for business are clearly welcome. I do, however, agree with the hon. Gentleman that there is concern about the speed with which the diverted profits tax is being introduced. I congratulate the hon. Member for Amber Valley (Nigel Mills)—who has just left the Chamber—on triggering a Westminster Hall debate on the subject, during which we scrutinised it a little further.
Mr Andrew Love (Edmonton) (Lab/Co-op)
I want to make some brief comments on a number of issues that have come up in the debate so far: tax simplification, where the impression is being given that these measures will simplify taxation; avoidance and evasion, where there are major problems in delivering on the commitments the Government have given; welfare reform, where the Government’s track record is appalling; and the impact on income distribution, where it is being suggested that those on the top incomes are most affected by the Budgets over recent years, when actually it is quite different.
First, let me join in the chorus of concern about the lack of scrutiny under this wash-up process. There have been many comments in the media today from various experts—taxation bodies, chartered accountants and others—all expressing concern that, given the level of complexity involved in this Finance Bill, we simply will not get adequate scrutiny by rushing through all its stages in one day. I share that concern, and I am pleased to see that it is a concern that is recognised across the House. I would have preferred a much simpler Bill that included only a limited number of provisions. When we return and there is a Labour Government, we can have a Finance (No. 3) Bill, enacting proper measures to deal with the problems in this country.
I wish to discuss four issues and the impact this Budget and previous Budgets since 2010 have had. The first issue is tax simplification. It would be wrong to suggest that our taxation code is not getting more complex, and this Bill will add significantly to the complexity. I put it down simply to the way in which Whitehall operates; our bureaucracy is geared to the creation of legislation and of taxation measures. To take a perfect example, the Treasury is full of people who are there to guide and advise the Government on the latest taxation measures. Up against them we have a tax simplification project that consists of three nominated officials and a few civil servants. It is an unfair game; it is impossible for the tax simplification project to counter the further moves being undertaken towards complexity in our taxation system. It requires government—I include government on both sides—to address the real need, look carefully at whether all the taxation measures in our code are necessary, and take appropriate steps to reduce the number of codings and to make our taxation system simpler.
The second issue is avoidance and evasion. The Chancellor has said that his way of saving money over the next Parliament, should the Conservatives be re-elected, is to pencil in £5 billion-worth of reductions in avoidance and evasion. The first thing that has to be said is that that is an incredibly ambitious target. HMRC’s projection for the tax gap is currently about £35 billion, out of which about £4 billion is avoidance and £3 billion is evasion. So the total for avoidance and evasion, according to HMRC, is about £7 billion, yet we are being asked to believe that the Chancellor can deliver £5 billion through tackling evasion and avoidance in the next Parliament. That is a very tall order and we need to look very carefully at his proposals. The Office for Budget Responsibility has looked carefully at the suggestions being made, both in the Budget and in the consultation document released the day afterwards, and it can find only just over £3 billion-worth of savings. It has attached to those £3.1 billion savings either a “very high risk” or a “high risk” as to whether there will be delivery. So a gap is already opening up between what the Chancellor has promised and what he can deliver, and the OBR is suggesting that the task may be very difficult for the Government because of the high-risk nature of this. We can all recall the Swiss bank fiasco; it was suggested that £3 billion to £4 billion would be raised, but we now have a much more realistic figure, much below that. In order that that does not happen again, we ask that the Chancellor be much more ruthless and realistic in his appraisals about what can be saved by tackling avoidance and evasion—it certainly is not the £5 billion that he has suggested in this Budget.
Similarly, on welfare reform the Chancellor is suggesting that he wishes to save £12 billion. I will discuss how he is suggesting it will be saved later, but first let me indulge a little in recent history. Over the past five years the Chancellor has instituted policy changes that he said would deliver £21 billion-worth of savings, yet according to the Institute for Fiscal Studies the actual reduction in the welfare bill—the actual cash saved—was £2.5 billion. So there is an enormous hole in his accounting. He is suggesting he will save £12 billion between now and 2020, but he has indicated only where £3 billion of that will be saved—there is another £9 billion to go. We hope that over the period of the general election he will give the electorate some idea of how he is going to save such an enormous sum, recognising his total failure to save the money in this Parliament. His track record is not good. Given all the other imponderables—the things that are not under Government control that can affect the welfare budget—it is difficult to see how he can save that amount of money.
That leads us to the elephant in the room: if the Chancellor does not save money from avoidance and evasion or from welfare reform, where is he going to make up the difference in order to deliver the £30 billion-worth of savings? That is where we come back to VAT. That is where the Conservatives’ track record shows from the past, and that is where we will be scrutinising carefully the comments that are made. Tax rises are on the horizon. I am being asked to cut my remarks short so I do not have time to deal with the distributional impact, but let me just say that the Budget will not affect the highest paid but will affect those in the two lowest deciles of payment more than anyone else. It is a regressive, retrograde Budget, as previous Budgets have been.
This is my last speech in the Chamber. The experience has been great and I have met a wonderful group of people, on both sides of the House. I have enjoyed it immensely, and I retire having said my piece on this Budget.
Tax Avoidance (HSBC)
Andrew Love Excerpts(9 years, 2 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Urgent Questions are proposed each morning by backbench MPs, and up to two may be selected each day by the Speaker. Chosen Urgent Questions are announced 30 minutes before Parliament sits each day.
Each Urgent Question requires a Government Minister to give a response on the debate topic.
This information is provided by Parallel Parliament and does not comprise part of the offical record
Mr Osborne
They don’t want to hear about their record in government, Mr Speaker. Every single alleged offence happened when the Labour Government were in office. The information became publicly known when the Labour Government were in office. Lord Green’s first public appointment was as chair of the Prime Minister’s business council under the Gordon Brown Administration. The information was received from the French authorities under the last Labour Government. So I think the whole House—and, indeed, my hon. Friend’s constituents, who pay their taxes—would like the shadow Chancellor to get up and express a little bit of humility and contrition for the mistakes made when he was in office.
Mr Andrew Love (Edmonton) (Lab/Co-op)
Since 2010 the Chancellor or Treasury Ministers have met HSBC 56 times. Was tax avoidance or tax evasion ever discussed at those meetings, and what was the outcome of those discussions?
Mr Osborne
First of all, it is not surprising that the British Government—Conservative, coalition or Labour—would meet one of the country’s largest institutions and banks. So that it is not a matter for surprise. I am happy to write to the hon. Gentleman about any details we have about particular meetings.
Tax Avoidance (HSBC)
Andrew Love Excerpts(9 years, 3 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Urgent Questions are proposed each morning by backbench MPs, and up to two may be selected each day by the Speaker. Chosen Urgent Questions are announced 30 minutes before Parliament sits each day.
Each Urgent Question requires a Government Minister to give a response on the debate topic.
This information is provided by Parallel Parliament and does not comprise part of the offical record
Mr Andrew Love (Edmonton) (Lab/Co-op)
Tax evasion is illegal in this country and in Europe. How many prosecutions have resulted from the revelations of tax evasion at HSBC?
Mr Gauke
As I outlined in my remarks, the main focus for HMRC has been the use of civil penalties. That approach has been followed consistently under Governments of all colours. There has been one prosecution in respect of this evidence. It is worth pointing out that prosecutions as a whole are on course to increase fivefold in this Parliament.
Oral Answers to Questions
Andrew Love Excerpts(9 years, 3 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Priti Patel
My hon. Friend is absolutely right. [Hon. Members: “Is he a champion?”] He is, indeed, a champion, and a strong voice for his constituency and his constituents. He is of course right in every respect. This Government are backing business every step of the way. Our long-term economic plan is making it easier to start and grow businesses, as he has seen across his constituency.
Mr Andrew Love (Edmonton) (Lab/Co-op)
Figures published by the Bank of England last week show that net lending to business is still negative. After four and a half years of this Government, when can we expect the figures to go positive, and will we see out the last 100 days of this failed Government, who need a fresh Government to do the job for them?
Priti Patel
To put it bluntly, this Government have turned around not only the economy, but the business environment. This Government have backed British businesses and business lending every step of the way, which is in stark contrast to a Labour Government, under whom that would only go backwards.
BMI Pension Fund Compensation
Andrew Love Excerpts(9 years, 5 months ago)
Westminster HallRead Full debate Read Hansard Text Read Debate Ministerial Extracts
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.
This information is provided by Parallel Parliament and does not comprise part of the offical record
Mr Andrew Love (Edmonton) (Lab/Co-op)
As always, it is a great pleasure to serve under your chairmanship, Mr Sanders. I congratulate my hon. Friend the Member for Edinburgh North and Leith (Mark Lazarowicz) on securing this important debate.
My hon. Friend raises an important issue on behalf of the employees and pilots in his constituency who have suffered as a result of the collapse of the BMI pension scheme, which entered the Pension Protection Fund in 2012. He talked about the tax treatment of the beneficiaries of those assisted, although I am not sure that “beneficiaries” is the right word to use in this context. The so-called beneficiaries are penalised not only through the tax treatment but by the PPF’s complex rules, checks and balances, which do not operate optimally for this particular group of employees in this particular industry. In fact, they operate harshly.
For example, there is the case of the 51-year-old pilot, a father of three, who will see his pension cut by 44%; or the pilot who has flown for Monarch for nearly 30 years, contributing a significant amount to the company pension fund, who has seen his retirement fund slashed by almost £1.7 million; or the pilot who was just two and a half years away from his planned retirement when he was told that 50% had been wiped off his pension’s value and that a lump sum would not be forthcoming. I ask the Minister, or her colleagues in the Department for Work and Pensions, to take a fresh look at the rules under which the PPF operates. The rules are set by Parliament, and it is through Parliament that those who suffer rightly take up their cause to seek some measure of redress.
With the consent of the Chair, I hope to be able to open out the whole issue to critical scrutiny and to seek the Minister’s support for the difficulties that I shall illustrate and that other hon. Members have illustrated. The problem is not confined to participants in the failed BMI scheme: it looks as though it will also affect the 170 pilot participants and other Monarch ground staff participants in the Monarch Airlines pension fund, which has been under assessment by the PPF since last month. In all, the problem will affect around 300 people, and the problem ranges from the tax treatment of the pensions to the compensation caps operated by the PPF. I shall focus on the compensation cap as it affects the airline industry.
The PPF compensation caps are in place, as far as I understand it, for two main reasons. First, they protect the viability of the PPF itself. The PPF is funded mainly by a levy on its members. Hon. Members will be aware that it is not funded by the taxpayer and that whatever flexibility of treatment for those affected by pension fund collapses I argue for today will not result in any recourse to the taxpayer. I support in principle the concept of compensation caps in order to sustain the PPF, but they were not intended to bear down so harshly on a specific group of workers. Fortunately, those who are particularly adversely affected by the compensation cap are not vast in number. As was indicated earlier, some 3,000 or 4,000 members of the various schemes are affected, and of those some 300 are directly affected by the cap.
Secondly, the compensation cap relates to the concept of moral hazard. The PPF is not designed to be a backstop for those tempted to speculate on or gamble with pension money and then expect the PPF to pick up the bill if their risky ventures do not pay off. I understand and sympathise with that concept as it is right in principle, but why should those who are unable to affect the operation of the pension fund be penalised so harshly? I am not aware that any of the 300 people directly affected were in any way involved with the governance of the pension fund or with high-level business decisions inside the companies concerned, yet in terms of the benefits that they will receive they are being singled out for particularly harsh treatment.
Hon. Members might have noted something in common between the groups of participants adversely affected by those pension schemes: they work for airlines. That is related to the reason the compensation cap mechanism seems to operate so harshly. Thirty BMI pilot members of the scheme and 17 Monarch pilot members face losing more than 50% of the pension income they originally expected. The 67 Monarch pilots alone stand to lose, in aggregate, around £900,000 a year in lost pension, which is an average of £13,500 per pilot per year.
The way in which the PPF operates its cap appears to discriminate against those with shorter working careers: the earlier the retirement, the lower the annual cap is set; and higher compensation awards for long service only kick in after 21 years of pensionable service. The pension cap also operates in a way that is not helpful, given the typical career pattern of pilots in the aviation industry. Pilots normally start their careers in commercial aviation in their late 20s or early 30s, and the normal pension age for Monarch and other schemes is 55 for most pilots. They therefore have far less prospect of accumulating materially more than 20 years of pensionable service.
Only three of the 67 Monarch pilots affected by the cap, for example, have more than 25 years of pensionable service; none has 30 or more years. As a result, many of the 300, although beneficiaries no doubt of membership of the PPF, are left feeling that they have been short-changed and made to pay an unreasonable penalty for no other reason than the career path and pension arrangements available in the aircraft industry. Frankly, such matters are outside their control.
PPF regulations can and do change, often in the interests of equity. Will the Minister undertake to review the issue with her officials and the Department for Work and Pensions to see what can be done to provide a measure of easement? The Pension Schemes Bill is proceeding in another place, so that might be the mechanism through which Ministers choose to make such a change. If that is not possible, perhaps the appropriate Minister will write to me about adjusting the compensation cap, what flexibility the Government have and what amendments, if any, might ameliorate the harshness of existing arrangements. Alternatively, the Minister may ask the Department for Work and Pensions or the PPF to write to everyone taking part in the debate about what consideration the Government have given to the issue and what powers they have to adjust the compensation cap accordingly.
To return to those most severely affected by the compensation cap, the European Court of Justice has expressed the opinion that any compensation restrictions should not reduce the rights of members of an occupational pension scheme to below the 50% level required by the insolvency directive. Will the Minister outline the Government’s attitude to the Court’s judgment and whether as a result the PPF rules will be altered to comply with that view? If so, when?
I am grateful to you, Mr Sanders, for the latitude that you have shown. The matters that I have been discussing primarily relate to the Department for Work and Pensions, but they are the origin of the strong feeling among airline staff that they have been singled out for adverse treatment. I have raised the wider issues of compensation caps as they affect the airline industry, and I hope that the Minister will be able to give a response, or seek one from her colleagues in the Department for Work and Pensions, that will address the patent inequality of the way in which certain pension scheme members are treated under the PPF.
Oral Answers to Questions
Andrew Love Excerpts(9 years, 5 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Danny Alexander
My hon. Friend is absolutely right to say that devolution, city deals and the growth plans we have put in place for every local enterprise partnership area are an incredibly important part of delivering infrastructure. He refers to two projects that are very important in the city he represents and I would, of course, be delighted to meet him and any other interested colleagues to discuss them.
Mr Andrew Love (Edmonton) (Lab/Co-op)
One hears the pious words of the Chief Secretary regarding house building, but has he not presided over the lowest level of house building since the 1920s?
Danny Alexander
In case the hon. Gentleman does not remember, he was present in the last Parliament when his party was in government and caused the most severe economic crash that this country had experienced for very many decades. The housing market, of course, gets affected by the economic cycle, which is precisely why this Government have presided over the highest level of affordable house building in this country for 20 years. Under the hon. Gentleman’s party, the number of affordable houses in this country fell by 421,000; under this Government, it has risen by hundreds of thousands.
Autumn Statement
Andrew Love Excerpts(9 years, 5 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mr Osborne
My right hon. Friend is absolutely right. Of course, he knows that we embarked on this work on how to extend support to postgraduates when he was Minister for Universities and Science—it might have been him who first proposed the idea to me—and I am absolutely delighted that it has come to fruition. This is one of the biggest reforms I have announced today. It will provide real support for postgrads, who do not currently get any support. In almost all the reports that one reads on social mobility, including the report by Alan Milburn, that has been identified as a barrier to entry for people from low-income backgrounds into the professions. It is a really important step forward. Again, I suspect that it will not be the headline in tomorrow’s newspapers, but that does not mean that it is not going to change lots of people’s lives.
Mr Andrew Love (Edmonton) (Lab/Co-op)
Yesterday, the right hon. and learned Member for Rushcliffe (Mr Clarke), a former Chancellor, gave an extended interview to the BBC in which he said, among other things, that the Government should keep tax increases in the locker in case they are needed. Does the Chancellor intend to consult former Chancellors on his long-term economic plan? If not, will he now deny that a VAT rise will be imminent after the next election?
Mr Osborne
I have set out today how our plans to bring the deficit down and bring borrowing down can be achieved through spending reductions in Departments and through welfare savings, and therefore do not require tax increases. I also explained that if we were to achieve over the next period the same as we have achieved during this Parliament in dealing with tax avoidance, tax planning and aggressive tax evasion, we could achieve £5 billion of savings, or extra revenue, in that space of time as well. That is a better way to proceed, and that is the course we have set.
EU Budget (Surcharge)
Andrew Love Excerpts(9 years, 6 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mr Osborne
My right hon. Friend is absolutely right. Of course, we needed the agreement of all the member states for this budget deal. Any one of them could have blocked the deal, but we got the support of all the other 27 member states, not just to delay the payment and have no interest applied but permanently to change the rules.
Mr Andrew Love (Edmonton) (Lab/Co-op)
For the fourth time, I think, in this House, may I press the Chancellor to tell us which Foreign Minister or which Commission official agrees with his interpretation of the rebate?
Mr Osborne
As I say, it required the agreement of all 28 member states to get the budget deal at ECOFIN. The discussion on the British rebate was a discussion had with the Commission. The Commission confirmed that the rebate would apply, and apply in the amount it did, only on Thursday night. The hon. Gentleman also serves on the Treasury Committee. If he, like every other Labour Member, was so wise about the number, why were they not saying this beforehand? Not a single Labour MP, either in the Chamber of the House of Commons or on the media, said anything other than that we would be paying £1.7 billion. They are trying to be wise after the event, and they have been found out.
Oral Answers to Questions
Andrew Love Excerpts(9 years, 6 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Danny Alexander
I am sorry that my hon. Friend has brought up the shadow Chancellor’s recent driving incidents, but I agree with the point that the Labour party made the economic mess that we—Liberal Democrats and Conservatives—came together in a coalition to sort out. We have made strong progress in this Parliament, including achieving the strongest growth in the G7. The last thing that the country needs is to hand the keys back to a majority Labour Government.
Mr Andrew Love (Edmonton) (Lab/Co-op)
The long-term economic plan is not working in terms of the living standards of people up and down the country. What has been the rate of growth of wages over the past year?
Danny Alexander
The rate of growth of real wages has been low, and that needs continued attention in the months and years to come. However, I hope that the hon. Gentleman would join me in welcoming the fact that millions of our fellow citizens are now in work as opposed to being unemployed, as they were under the Labour Government. We now need to work to make sure that we increase business investment, enhance productivity, and make sure that the benefits of the economic growth we are seeing are shared as widely as possible. I think that he and I would agree about that.