Budget Resolutions and Economic Situation

Angus Brendan MacNeil Excerpts

Thursday 21st March 2013 Commons Chamber

[The Secretary of State for Business, Innovation and Skills (Vince Cable)]

I am delighted to speak in support of the Budget and thank the shadow Chancellor for 35 minutes of pantomime. More worryingly for me, I occasionally read in the newspapers that we agree with each other; I am not sure whether he regards that as a bigger slander than I do. I have been trying to find out what it is that I am supposed to agree with and to understand what actually is his plan B. A quick search revealed seven different variants of plan B. In fact, that is almost certainly an understatement, because the shadow Chancellor has had more positions on the economy than there are positions in the “Kama Sutra”.

Let me run through some of the variations that we have heard from the shadow Chancellor over the past couple of years. He started with the big stimulus to the economy that was going to come from the bankers’ bonus tax, which would have imposed a £2 billion tax on a tax base—a bonus pool—of £1.6 billion. He had not realised that, since his time in charge of the City, the bonus pool had shrunk from £14 billion.

The shadow Chancellor then moved on to the five-point plan, which was mostly pretty sensible. It included apprenticeships, which we are already doing on a much bigger scale. He also wanted, I think, £200 million for the regional growth fund. Well, we have given it billions, not hundreds of millions. He then moved on to the reallocation of the money from the 4G auction sale, but it had already been allocated—I have already spent quite a lot of it.

We have now moved on to trying to understand what plan B actually means today. As far as I can fit it together, it consists of several elements, including a big stimulus from a value added tax cut, stopping Government spending cuts and, somehow out of the alchemy, reducing borrowing. I have tried to work out how this plan was created and am struck by its similarity to the economic strategy being developed by Nigel Farage, although I may be doing the UK Independence party a disservice.

The shadow Chancellor and I have a serious interest in economics. Before we discuss how to deal with this crisis, we have to try to understand how it originated. I think that most serious economists, whether they are in the Keynesian tradition or not, would acknowledge that this is not a cyclical recession. It is what is now called a balance sheet recession, and in order to understand how that happened we need to understand why the balance sheet got so big in the first place and why private sector deleveraging is now happening on such a massive and damaging scale.

This is an uncomfortable set of questions for the shadow Chancellor because, among other things, he has to explain the following. Why was it that in the 50 quarters of growth without inflation, nobody noticed the massive asset bubble in residential and commercial property, which has since burst? He has to explain why households in the UK, which have become heavily over-leveraged, managed in that period to acquire the highest level of personal debt in relation to income of any country in the developed world. He has to explain why a medium-sized bank in Scotland was encouraged and actively supported by his Government in trying to become the biggest bank in the world on the basis of dodgy acquisitions and gambling in its casino operations. He also has to explain why, when his former boss commissioned an excellent study on the banking system in 2000, which explained why there was a cartel operating that was squeezing the life out of small business, his Government did absolutely nothing about it.

We have a major economic crisis caused by balance sheet deleveraging, arising out of a major financial crisis. One would have thought that those on the left would want to talk about a crisis of financial capitalism, but they do not want to talk about it at all. In fact, the shadow Chancellor has a striking resemblance to the lead character in “Fawlty Towers”. Colleagues may remember the episode in which he goes around with great indignation, wanting to have an animated conversation about Germany, but nobody wants to talk about the war. The shadow Chancellor wants to talk about the economic crisis, but not the financial collapse that he presided over.

[Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)]

The right hon. Gentleman has talked about an asset bubble. What is the Chancellor’s mortgage scheme, other than the hope of an asset bubble to get him out of trouble? What growth or capacity would that add to the economy? The problems of this economy will not be answered by yet another asset bubble. What are the Government trying to do? All that their scheme will do is create another asset bubble.

[Vince Cable]

There are two elements to the Chancellor’s housing package. The first is the development of the FirstBuy scheme, which will provide £3.5 billion for shared ownership. That has been widely welcomed because it will increase the demand for housing and get the housing market going. The other, more ambitious scheme is a form of insurance for mortgages, which has been very successfully applied in Canada, for example, where it prevented a collapse of the market of the kind that occurred here and introduced greater stability. The Chancellor is now consulting on how that scheme should be designed, which is absolutely right.

--- Later in debate ---

[Vince Cable]

My colleague is absolutely right. He reminds us of two things that the Government have done. One is the freezing of petrol duty. The other is the allowance for remote communities, which he ably represents, as does the hon. Member for Na h-Eileanan an Iar (Mr MacNeil).

[Mr MacNeil]

Does the Secretary of State agree that the rural fuel derogation should be increased? A 5p cut is not enough; we really need a 10p cut. I am sure that the hon. Member for Argyll and Bute (Mr Reid) would agree with me.

[Vince Cable]

I am sure that we would have free petrol in a perfect world.

Let me deal with some of the points of economic substance that have been raised. The first was about job creation. It is true that in the last set of figures there was a very small increase in unemployment. However, that happened against the context of the last three months, in which 130,000 new jobs were created, vacancies rose and redundancies fell. In this Parliament, we have created 1.25 million new private sector jobs. It is difficult to understand why, if the economy is performing as badly as the shadow Chancellor claims, a large number of new private sector companies are creating jobs in that way. There are regions of the country, such as the west midlands, that in the boom periods saw a decline in private sector employment. That is now being comprehensively reversed.

The question put by my hon. Friend the Member for Portsmouth North (Penny Mordaunt) is apposite: why does the Labour party think that 600,000 jobs are being predicted by the OBR in the coming year? We got the ludicrous answer that it has something to do with immigration, but immigration is about the supply of labour, not the demand. Where is the demand coming from, other than a favourable business environment that encourages small companies to establish and grow jobs?

The Economy

Angus Brendan MacNeil Excerpts

Tuesday 11th December 2012 Commons Chamber

[Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)]

The right hon. Gentleman will know that the rebate scheme has been a success. When will mainland areas of Scotland be included? There are already such schemes in continental mainland areas, so why is there a delay in its introduction in mainland Scotland? Areas such as Caithness, Sutherland and Argyll need it—and need it quick.

[Danny Alexander]

I am grateful for the hon. Gentleman’s endorsement of the current scheme as a success. I hope he will spread the word to his constituents and ensure that the credit goes to the appropriate place.

To win the argument at European level for an extension of the scheme, we must pass the same test and provide the same evidence to justify including such remote areas. We are working with local authorities in various parts of the country to gather evidence to support our case. As the hon. Gentleman will recall, we must take that evidence to the European Commission. If it approves our proposal, it must in turn be approved by all 27 EU member states. There are a number of hurdles and a significant process to engage in to gather evidence.

[Mr MacNeil]

rose—

[Danny Alexander]

If the hon. Gentleman will forgive me, I will make progress. Many hon. Members wish to speak in the debate.

There has been good engagement between the Treasury and the FairFuelUK campaign, which has pressed its case very strongly. I welcome its engagement.

The Government are on the road to cutting the deficit we inherited, but we are also building a fairer society. The distributional analysis that we publish shows that that continues to be the case, despite the tough choices we have made. It is worth pointing out that, under the previous Government, the Treasury never published detailed distributional analyses of its decisions, but under this Government the Treasury publishes them at every fiscal event. The analyses show that the top 20% of households continue to make the greatest contribution. In fact, the cumulative impact since the June 2010 Budget of tax, tax credit and benefit reforms shows that households in the top 10% see the greatest reduction in their income, both in cash terms and as a percentage of net income or expenditure.

--- Later in debate ---

[Danny Alexander]

I am grateful for the hon. Lady’s support—I take support from wherever it comes these days.

The Government have taken sensible further steps to restrict pensions tax relief. The decisions the Government are taking are not easy, but as a country we must live within our means. The scale of the problems this country faces means that the period of fiscal restraint must continue for longer. That is why the Government will shortly set out spending plans for the financial year 2015-16. I will carry out a spending round in the first six months of next year to set those budgets and ensure that we continue to build a sensible long-term plan for the country’s finances. We will need to find an extra £10 billion of savings from Departments in the spending round. That will mean more difficult choices, but they are also responsible choices as the coalition continues to work to restore stability to the UK economy.

We have heard this afternoon and in Question Time that some criticise the autumn statement. The division in British politics is very clear. Government Members live in the real world. We understand that times are tough and that there is no endless supply of money, and recognise that the right and responsible action is to take the difficult decisions to ensure we can live within our means. Labour Members appear to live in a fantasy world. They still believe that they ended boom and bust, despite the events of the past five years. They still refuse to apologise for the mess they created and fail to be honest with the British people about the tough decisions that any party in government would have to take.

It will come as no surprise to hon. Members that I will not take advice from the Labour party, which wrecked our economy because it allowed the country to become too dependent on revenues from the City of London and paid too little attention to the rest of the country. Labour insulted pensioners up and down the country by increasing the basic state pension by 75p, and insulted 5 million of the lowest-paid workers by increasing their income tax bill with the abolition of the 10p rate.

[Mr MacNeil]

rose—

[Danny Alexander]

I will not give way—I will finish my speech shortly.

The Labour party thought it was right that private equity managers should pay a lower rate of tax on their earnings than the person who cleaned their office, and insulted hard-working people and businesses up and down the country by failing to crack down on tax avoidance and evasion in 13 years in office.

This Government face some of the most serious decisions we have had to make in our recent history. We are recovering from a decade of debt, we inherited the largest deficit since the second world war, and we have had to face a multitude of problems abroad. However, we continue to take simple, sensible steps towards recovery. We continue to build a strong, sustainable economy and to build a fair society. I commend the autumn statement to the House.

--- Later in debate ---

[Rachel Reeves]

Thank you, Madam Deputy Speaker. Perhaps the hon. Gentleman did not like the answer to his intervention. Fair enough—I would not be pleased to hear that my Government were spending an extra £14 billion on welfare because of their failure.

This year the economy will shrink by 0.1%. The Chancellor’s two gap years—two years of painful cuts, more borrowing and no growth—are a shocking indictment of a failed plan. He stands up and tells the nation that the British economy is healing and that he is equipping Britain to win in the global race, yet over the 24 months since the spending review the UK economy has grown by just 0.6%. In the same period, the US economy grew by 4.1% and the German economy by 3.6%. Helpfully, the International Monetary Fund’s world economic outlook data allow us to put together a league table of 184 countries based on total growth between 2010 and 2012, so we can now analyse our performance in the global race that he describes with this Government at the helm. Of those 184 countries, where do Members think Britain comes? We are 158th. It is a relegation battle. We are behind Togo and Namibia, Albania and Macedonia, but there is no need to worry—apparently we are hot on the heels of Mali, Samoa and Fiji! We are the worst performing G7 country, apart from Italy. In the global race, Britain is well and truly in the slow lane with this Chancellor at the helm.

[Mr MacNeil]

Does the hon. Lady agree that the context she has rightly given the House is the reason the Scottish referendum on independence will be won in 2014?

[Rachel Reeves]

I will let the good people of Scotland make their decision when the time comes, but I believe that we are stronger together—stronger united than divided.

The worst aspect of the Chancellor’s two wasted years is the long-term damage being done to our economy. Every month of inaction, every failed initiative and every growth forecast downgraded is another hammer blow to the work force, our businesses and our national infrastructure. The skills and motivation of British workers are going to waste, with one in three of our 2.5 million unemployed out of work for more than a year and 3 million of those with jobs wanting to work more hours, but unable to find the work. In reality, we are falling behind, and the Chancellor has nobody to blame—not the snow, not the royal wedding, not the eurozone.

I agree with the chief economist of UBS, George Magnus—[Interruption.] [Hon. Members: “He’s gone!”] Obviously the hon. Member for Spelthorne (Kwasi Kwarteng) does not want to hear what the chief economist of UBS has to say. I will send him a copy of Hansard. George Magnus said that the Chancellor’s excuse

“falls under the category of ‘Sorry Miss, the dog ate my homework’”.

He also said that

“the problem I think that the Chancellor has with the eurozone is that we are just like them. We have this single-minded focus on austerity and the lack of growth is basically crippling our ability to meet our fiscal targets.”

I agree that the Chancellor and his economic plan are to blame. Two and a half years of austerity, two and a half years of this Chancellor, and what do we have to show for it? We have no growth, more borrowing and a tragic waste of time. [Interruption.] It is good to see the hon. Member for Spelthorne in his place again.

A year ago the IMF warned:

“If activity were to undershoot current expectations and risk a period of stagnation or contraction, countries that face historically low yields (for example…the United Kingdom) should also consider delaying some of their planned consolidation.”

At that time the IMF was predicting 1.6% growth this year; now the OBR tells us that the economy is more likely to shrink by 1.6% this year.

--- Later in debate ---

[Mr Darling]

I will address that point later. It is an important point, and I do not believe we should just sit back and hope that growth returns. The shadow Chancellor and many others both inside and outside the House also do not believe that the Government’s approach is right.

We are heavily dependent on money that is coming in from a financial transaction. In addition, the OBR has now found that by 2016-17 our revenues will be £30 billion less than it forecast in March. That is a huge gap, which will have to be filled.

What should we do? Whenever the Opposition suggest that perhaps the Government could do a little more, the Government parties—the Conservatives and Liberal Democrats—always say, “That’s all about borrowing more.” This Government are borrowing £212 billion more than they said they would not because we are spending money on projects and so forth, but because of failure—because our revenues are down. That is why we have got this gap.

When we eventually have a recovery, this country will need infrastructure. Over many years, we spent a lot of money on transport and energy. That was the sort of spending the Government say should not have been made, but we now know it was desperately needed, and we need to invest more in infrastructure, as well as get debt and borrowing down. We must invest in education, too.

On energy, the Government’s policy is completely contradictory. We are getting different signals every day of the week. On transport, I say again that it is not good enough to have no airport policy until halfway through the next Parliament, when we will not be able to do anything as another election will be coming up. That is not the right signal to send to our country, let alone the outside world.

Investing more in infrastructure projects would be one way to get confidence back. Confidence was trashed two years ago. If anyone were running a business now, would they hire more people or open a new production facility? No, they would not, because it appears that the economy will be bumping along the ground for another five years or so. I again remind Members of what has happened to Japan. People say, “We would never be like that,” but Japan has had non-existent growth for 15 years.

[Mr MacNeil]

Some commentators—at one time Ben Bernanke, and lately notably Paul Krugman—have talked about higher inflation targets for Japan, and also for the UK and other countries that are suffering a downturn. What is the right hon. Gentleman’s opinion on that? Does he, too, support higher inflation targets as a way of stimulating recovery?

[Mr Darling]

There is a lot of debate about that issue. I do not have the time to address it in detail, but I have said—including in a programme that will be broadcast tonight—that I think the Bank of England needs to examine its role, because for a long time we have said its job is purely to target inflation, yet central banks across the world are now also targeting growth, and perhaps we should consider whether we should formalise that role. Mark Carney was an excellent choice as the next Governor, and I hope he will think about that.

Talking about Governors, the current Governor, Sir Mervyn King, made an important point in New York last night when he talked about the G20, which had done so much at the height of the crisis in 2009, showing the determination that people expected in order to prevent the entire world economy from going over a precipice, and said that that spirit was now dead. He is absolutely right about that. It is important that we in this country, along with President Obama, now that he has been re-elected, look again at what we can do collectively as part of the global community to try to get the world economy not only to resolve some of the problems we face, but get growth going again.

That inevitably takes me on to Europe and the eurozone, because it is a tragedy that a legal structure and an economic structure that could do something about getting growth going again is simply failing to do so. Greece is not sorted out yet; another attempt was made a couple of weeks ago, but as far as I can see it leaves Greece with even more debt than it had. Until the Spanish banks are bailed out, they will simply hold back the whole of the eurozone, and the sooner Spain goes to get the bail-out it needs, the better it will be. Then we need to deal with the question of austerity. Austerity on its own does not work. Those who are interested may wish to know that there is an interesting article by Olli Rehn, the economic Commissioner, in today’s Financial Times, in which he just asserts that it is going to work, in the same way as this Government assert that austerity is going to work—frankly, I do not see it. We need to use our engagement in relation to the eurozone and to the European Union to try to persuade countries that unless they act together, in the same way as we did three or four years ago, although in a slightly different context, we and the eurozone countries are simply going to bump along on the bottom for years. If that is the case, the human cost is that we are condemning tens of thousands, if not hundreds of thousands, of people in this country, and perhaps millions of people in the European Union, to unemployment and low standards of living. If we do that, future generations will never forgive us.

--- Later in debate ---

[Kwasi Kwarteng]

Absolutely. The former Prime Minister has said that on a number of occasions. I have been on record as saying that the first Labour Administration between 1997 and 2001 was, I freely admit, a very conservative fiscal Government. As the right hon. Member for Edinburgh South West well knows, during those four years the budget was never in deficit. We ran two years of surpluses and the budget in the other years was balanced. It was only after 2001 that the disaster occurred, that the wheels spun off the car and we suffered under a profligate traditional Labour tax and spend regime. I use the phrase “tax and spend” very gingerly, because the taxation never covered the spending.

That was precisely the reason why the Government ran those deficits—to pay for their projects, to pay for greater spending. They were required to borrow money. I remember that in 2001 one of their favourite columnists, Polly Toynbee, said that Labour would have to tax more in order to spend the money. At least that was an honest position. She was suggesting that Labour should try and balance the budget at a higher level of spending. I and my colleagues might want to balance the budget at a lower rate of spending, but both Polly Toynbee and those on the Government Benches would accept is that it is a road to disaster to borrow yet more money in order to spend on grand projects or whatever utopia the Government want to build in this country. We now have the consequence of this recklessness—of Government Ministers at the time spending more and more money and running 3% deficits.

[Mr MacNeil]

Can the hon. Gentleman tell us for how many years since 2001 the UK has been able to pay its way?

[Kwasi Kwarteng]

I can answer the hon. Gentleman very directly. With reference to our public finances, we have been borrowing money every year—every single year. It is likely that even if we are able to eliminate the structural deficit by 2018, this country will have seen nearly 20 years of continual deficits. This is an appalling legacy that Labour has left the country. Since the end of the second world war, we have never run 20 years of continual deficits, which we will do as a consequence of Labour mismanagement and old-fashioned incompetence.

--- Later in debate ---

[Mr Weir]

The Scottish Government have been putting more and more money into capital investment. [Interruption.] It has not been decreasing. They have been putting money into capital investments that matter, despite the overall budget from Westminster having been cut.

The Scottish Government have been taking the action that the former Chancellor, the right hon. Member for Edinburgh South West (Mr Darling), called for earlier. In June, they announced a £105 million package of investment for so-called shovel-ready projects. Conventional capital investment has been boosted by a £2.5 billion pipeline of infrastructure projects that is being delivered through the non-profit distributing model. The Scottish Government recognised long before the current Chancellor did that the model of private participation in infrastructure was fundamentally flawed, although Labour does not seem to have cottoned on to that yet. A total of £700 million has been switched from the resource to the capital budget to support capital investment. The Scottish Government are supporting a range of innovative finance initiatives such as the National Housing Trust.

It appears from what he said this afternoon that even the former Chancellor has changed his original views and now supports the increase in capital expenditure on infrastructure, although that has not prevented his Labour colleagues in Scotland from continually attacking it; such is the way of politics, I suppose. Indeed, their leader has announced a cuts commission—an initiative whose only backers appear to be their friends in the Better Together campaign, the Conservatives.

[Mr MacNeil]

Has my hon. Friend noticed, as I have, that the main cheerleaders for Labour in Scotland’s cuts are the Tories in Wales, who welcome them on board with the same ideological baggage?

[Mr Weir]

My hon. Friend makes a good point. The Conservatives in Scotland have also supported the cuts commission, so it appears that they are all cutters together rather than better together.

The SNP Government in Scotland have been very active in ensuring that we rebalance our economy with investment in new green initiatives. The Government down here often talk about that, but we have seen little evidence of it. Indeed, the proposals in the Energy Bill give cause for concern about the way in which this Government look at green investment and whether there is to be investment in new green energy or whether the Treasury is winning the battle and we are going down a different route.

This is important to Scotland because the renewables industries now support more than 11,000 jobs in Scotland, and that figure is growing. There have been significant investments in green energy. Gamesa chose Leith for its new UK offshore wind manufacturing plant, which will create up to 800 jobs. Burcote Wind has announced plans for a £l billion investment creating up to 600 new jobs. Global Energy Group has announced that Nigg skills academy will deliver training for up to 3,000 people over three years. Scottish Power has announced the creation of 300 skilled jobs as part of a £5 billion investment in Scotland’s grid, and it is also investing £6.5 million in grass-roots skills development.

Autumn Statement

Angus Brendan MacNeil Excerpts

Wednesday 5th December 2012 Commons Chamber

[Mr Osborne]

My hon. Friend has been a powerful advocate for a more competitive business tax system in this country, and we have reduced again the headline rate of corporation tax. That makes it even more of an advantage for companies to headquarter and pay their taxes here, and it is part of what we are doing to win the global race. I congratulate him on the advice and support he gives in this area.

[Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)]

It is good to hear a UK Chancellor say that the private finance initiative is discredited—10 to 15 years after the Scottish National party did so. It is good, too, to hear of his belated conversion to some capital expenditure for shovel-ready projects—we wasted a couple of years by not listening to the SNP. We have had lost years of ever-growing debt paying for failure rather than growth, and that is projected to last until 2018. I wonder whether the Chancellor will introduce some competition to his job and perhaps return economic powers to Scotland, so that the Scottish Government can show him how it is done and get us out of the mess a little quicker.

[Mr Osborne]

The steps we have taken today, for example, to provide additional capital spending in Scotland, show the strengths of Scotland’s being part of a United Kingdom that is able to borrow money on world markets at exceptionally low rates. The SNP has still not answered the most basic questions about currency, about monetary policy management, and about the cost of debt and the like. Until the SNP can answer those fundamental questions about economic management, I do not think anyone is going to trust it with taking over control of that entire economic management through independence.

Public Service Pensions Bill

Angus Brendan MacNeil Excerpts

Tuesday 4th December 2012 Commons Chamber

[Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)]

Does the hon. Gentleman agree that, if the Scottish Government can find the ways and means to fund their pensions, they should be free from penalties from the Treasury at Westminster?

[Chris Leslie]

That comes down to how the legislation is drafted. There are different financial consequences for local government pension schemes than for other public service pension schemes. That is why we need clarity in the legislation. I am conscious that the Scottish National party Government in Scotland have argued that there is no need for a legislative consent motion to cover the matter because, in theory, the UK Parliament always had primary legislative power over the local government pension scheme in Scotland but has hitherto chosen not to use it. The Government in Scotland have been quick to accept the UK’s proposals, which is unusual, because they normally argue that more power should sit with Holyrood. The movement of the regulation-making powers means that the Scottish Government will not need to grapple with difficult decisions on the reform of certain pensions, but the Opposition feel it would be better for Members of the Scottish Parliament to have an opportunity to scrutinise and debate the application of the legislation to the local government pension scheme in Scotland. Amendment 11 to clause 3 would mean that the Bill would not apply to the local government pension scheme in Scotland unless that is explicitly approved by the Scottish Parliament. The hon. Member for Banff and Buchan (Dr Whiteford) and others have tabled parallel amendments—I gather they are in the third group, so we will probably return to this debate later.

Amendment 12, which is in my name and that of my hon. Friend the Member for Kilmarnock and Loudoun (Cathy Jamieson), relates to another key Government promise made to public service workers. It seeks to enshrine in the legislation another Government promise made to public service workers—the Government promised that their final salary schemes would be replaced with career-average revalued earnings schemes. That would ensure that public service workers continue to receive a defined benefit pension.

The Bill does not explicitly honour that promise, and clause 7 provides that schemes created under the Bill can be defined benefit or defined contribution schemes, or any scheme of any other description. That is fundamental to the arguments on the Bill, but it is also fundamental to the arguments that Hutton made and the agreements that were reached. All schemes were supposed to be succeeded by career-average defined benefit schemes. In some cases, the Government might like to continue small defined contribution schemes, but the amendment would not affect those; it would apply only to final salary schemes and ensure that they are replaced with another defined benefit arrangement. The amendment therefore simply seeks to put the Government’s promise to public service workers on a statutory footing.

A similar amendment was opposed in Committee, but the reasons given by the Minister were concerning. He claimed that the Government intended to replace the final salary schemes with career-average schemes, but that “the flexibility embedded in” the Bill

“could be helpful to scheme members in future.”

He added that

“it would not be appropriate for this Government to tie the hands of future generations and pension scheme members who might decide that, subject to the protection offered by the enhanced consultation and reporting obligations of clause 20, defined benefit schemes were no longer the most appropriate for public service workers.”––[Official Report, Public Service Pensions Public Bill Committee, 13 November 2012; c. 291-92.]

That is not the first time we have heard the Minister’s bizarre argument that legislation could bind the hands of future Governments. No Government can bind the hands of their successors in that way. Unless the Minister has an insight into changes in the democratic process of which we are unaware, that remains absolutely the case.

Therefore, the argument that clause 7 provides welcome flexibility to scheme members now or in future is, in the Opposition’s view, potentially misleading. In the rare circumstances that a defined contribution scheme is better than the defined benefit one, and scheme members and the Government wish to change schemes to defined contributions schemes, clauses 19 and 20 allow that to happen. Clause 7 provides no flexibility that does not exist in clauses 19 and 20. If we do not make the amendment, we allow the Government to go back on their promises. We seek to keep them to their word on those arrangements.

I know that many hon. Members wish to speak to proposals in this large group, so I shall make my final point on the question of closing local government pension schemes. My hon. Friend the Member for Corby (Andy Sawford) and the hon. Member for Finchley and Golders Green (Mike Freer), among others, have had extensive experience of local government schemes. In Committee, there was anxiety that the Bill mentions closing existing LGP schemes and beginning new ones. The problem with closing schemes is that there can be unintended and adverse consequences. We heard in Committee about triggering debts which might need to be crystallised on closure. Of course, not just big local authorities but small academies, charities and others are members of such schemes. They might find that they suddenly need to shell out one great lump of money simply because an existing scheme closes and the deficit needs to be dealt with there and then.

The Minister assured us that regulatory provisions did not require such crystallisation, and that there could be protections. The Opposition are not massively happy with that, but even if we accept the Minister’s word that closure does not mean closure, thousands of employers in the local government pension fund have individual admission agreements governing the terms of their participation—the agreements are not necessarily in a standard form, meaning that there could be thousands of different admissions contracts for the schemes. It is likely that at least some of the agreements will set out various powers for local authorities in the event of closure, including the power to collect a debt from the employer equal to its share of the scheme’s deficit. That would put a massive strain on participating employers and could put some of them out of business.

The Minister gave assurances on some of those points in Committee, but he missed the problem that the Bill allows local authorities to close their funds. The Government cannot prevent them from doing so under the Bill. The problem of triggering debts therefore remains substantive. There is also the question of whether closure means closure or continuing a scheme. The Opposition believe that a different approach is needed and that the Bill needs better drafting, which is why we have tabled amendments 20 to 28. We are not trying to add costs to the public purse and are keeping the Government’s proposals, but we are saying that it would be better to amend an existing scheme rather than to close and reopen it. They are in some ways technical proposals, but it would be better to err on the side of caution and provide that new regulations can amend scheme rules to ensure that all future benefits are accrued according to the provisions of the Bill and negotiated arrangements.

Those are essentially my comments on the Opposition’s proposals. My hon. Friends and others have tabled amendments in this group, but I shall let them make the case for them.

--- Later in debate ---

[John McDonnell]

Exactly, but I think it is across the piece. Whether or not we agreed with the last negotiations, or whether they were imposed or signed up to, at least some people felt there was some security for the future. People are becoming demoralised, which is why it is important that we insert in the Bill provisions for full consultation and agreement with organisations representing employees and for full openness and transparency. That is why new clause 3, moved by my hon. Friend the Member for Nottingham East, is critical. As has been said, at least in the private sector there is full display and transparency in what people sign up to, but there is no display or transparency in the public sector, particularly now that the Government have given themselves these powers.

[Mr MacNeil]

Given the comments about the police pension scheme, I am sure the hon. Gentleman understands the wish of the Scottish Police Federation that police pensions be controlled independently in Scotland. For England and Wales, however, does he feel that in future Governments should act more morally in relation to the terms of agreements that were made years before and under which police officers expect to retire, while also understanding, of course, that in Scotland they want clear of the system?

[John McDonnell]

I can fully understand the feelings of police officers in Scotland, as I can those of officers across England and Wales. People now just want safety and security in their pensions, which are theirs—they have paid for them and contributed to them. As my hon. Friend the Member for Nottingham East said from the Front Bench, they are nothing more than deferred wages.

--- Later in debate ---

[John McDonnell]

I fully agree. What concerns me is that the Henry VIII powers in clause 3 are retrospective. This is another reason why the valuation process is so critical: if there is not full openness, transparency and consultation, in particular with employee representatives, the Government could in future use the valuation process to withdraw some of the benefits of the scheme or increase the contributions retrospectively. People can sign up to a scheme and pay into it for 20 years, but then be told that the benefits are different—although I think that will be tested in law, because I believe that legally we are talking about accrued rights that are protected under European legislation. The Government do not accept that argument, but it is a critical point. That is why I have tabled my amendments. The Government underestimate the anxiety and fears out there—particularly among trade unions, but also in other organisations—which arise from the lack of confidence in the future management of the schemes in the best interests of employees and members.

Let me turn to my amendments 7 and 8. The Government’s reform was meant to change the nature of the schemes, so that they would be based on career averages, exactly as my hon. Friend the Member for Nottingham East said from the Front Bench. However, that is for a defined benefit scheme, not a defined contribution scheme, yet the Government have not committed themselves to that in the legislation. That is why I have tabled amendments 7 and 8, so that where a scheme is rearranged or staff are transferred into a new scheme, they must be defined benefit schemes, because that is what was promised in the negotiations with the trade unions. It is argued that we are binding future Governments, but all legislation is meant to bind future Governments, and any future Government could revisit this matter. At the same time, we need to try to give at least some security and ensure that the promises given by the present Government are adhered to. That is not much to ask, and it is all my amendments are designed to do.

[Mr MacNeil]

The hon. Gentleman puts his finger exactly on the issue: insecurity for future pensioners. That, combined with ever-growing inequality in our society and the economic multipliers that we might see operating, means that people who are now living quite comfortably might be facing penury in their old age, due to the root insecurity at the base of this Bill, which he is doing a good job of exposing.

[John McDonnell]

In part, this is linked to other reforms that the Government are introducing—my hon. Friend the shadow Minister touched on this. Where changes have been made to the delivery of public services—some of this relates to outsourcing, reorganising government or delivering direct services through new Government agencies or public bodies—people understood that there would be a commitment from the Government that they would be transferred into the same scheme they are in now, which would be a defined benefit scheme. That is not in this Bill, which is why I have tabled my amendments.

The amendments put the onus on whatever bodies are established—non-departmental public bodies or whatever—to ensure that they offer a defined benefit scheme. If they do not, they are breaking the commitment that the Government gave. In addition, it will create a disincentive. When staff transfer, they transfer into the new scheme that will be established. Many people now in a defined benefit scheme—whatever its nature, whether final or average salary, although we are moving towards average salary—fear that if at some stage they move, they will be offered only a defined contribution scheme. That is why I want more certainty in the legislation. The amendments propose that whatever happens in the future, whatever restructuring the Government bring in and whatever new schemes are established, the Government will adhere to their promise that there must be a defined benefit scheme. I do not want to be cataclysmic about this, but if that does not happen, the legislation could undermine the whole provision of public service pensions. People could start to withdraw from the schemes because they did not have the certainty that they thought they had when they entered them.

The amendments might seem relatively minor, but they are absolutely key. If we do not bring the employees with us, if we do not consult their representatives, if we do not involve them in the valuation process and if we do not stand by the guarantee of a defined benefit scheme that they have been given, we will break down people’s confidence in the public sector pensions system overall, and we will certainly break down their confidence in this Government’s ability to adhere to their promises. This is not the 25-year guarantee of no further reform that we were given from the Dispatch Box only a matter of weeks ago.

--- Later in debate ---

[Robert Neill]

I congratulate the hon. Gentleman on his arrival in the House. I have been dealing with him in the local government world for many years. I did my best to prevent him from coming here, but it clearly was not quite enough! He anticipates one of the technical issues that I was going to mention, and it is perhaps the most substantial one. Chronologically, it is not the first in relation to the Bill, but I might as well deal with it now for the sake of completeness.

I read with care the assurance that my hon. Friend the Minister gave in Committee. I entirely accept that it is not the Government’s intention to create crystallisation. However, I note that the finer details of the proposals are being considered, and we should look carefully at that. The Minister said that there was no requirement for the funds to be wound up, and I accept that, but I hope that he will consider the issues that have been raised by the Local Government Association about legal ambiguity.

I do not doubt that the Minister has no intention of creating a closure that would crystallise the debts of a scheme. That was always the basis on which I approached such negotiations when I was a Minister, and I am certain that nothing has changed in that regard. However, this was one area in which some of the nuttiest legal advice needed to be obtained—[Interruption.] I should have said “knottiest”. There is sometimes a risk of legal ambiguity, and that must be avoided at all costs. I would therefore urge my hon. Friend and his advisers at the Treasury to take on board the work that has been done in the DCLG and other Departments to find a means of resolving this issue. We all know where we want to end up, and I am sure that there is a means of achieving that. I know that the Minister’s skills and abilities will get us there. It is right to point out that some issues still need to be addressed, but they are not insurmountable in the context of where the Government want to get to. It is an important area to clarify to the maximum extent.

The other issue I want to touch on is governance. I hope that the Minister will consider the concerns raised by the Local Government Association and the unions about the lack of segregation between the scheme manager and the scheme board. Again, I do not think there is any dispute between us about where we want to end up, but it is a fact that the local government schemes have a good record in their management and a good record on transparency. When experienced representatives of local government employers raise concerns that the two functions of the scheme manager and the scheme board are difficult to reconcile within the same body, those concerns should not, in my judgment, be lightly dismissed. I note that the Minister sensibly and properly took on board the fact that there are still developments going on here and that proposals are still being developed. I hope that that will continue to be the case, and when he responds to the debate, he may be able to update us and reassure us that continuing discussions will take place with the experts in the local government sector to make sure that we get the best possible design for those matters.

Finally and more generally, I ask the Minister not to be deterred by undue reference to Henry VIII clauses. When I was taking the Localism Bill and the Local Government Finance Bill through the House, if I had £5 for every time I was criticised about Henry VIII clauses, I would have retired to some tax haven as a very rich man. [Interruption.] I probably would not have not done that actually as I enjoy being here so much. However, it is part of the knockabout banter we get here that Oppositions always say that there are excessive Henry VIII clauses, but when one looks back, one finds that when the Opposition move into government, they construct Bills with exactly the same sort of clauses. That is why I urge the Minister not to be put off by that; it is necessary to build in the flexibility that such clauses provide in any piece of legislation of this kind. What are important are the statements of intent about the manner in which those clauses should be used. I am sure that the Minister will be able to reassure us on that.

[Mr MacNeil]

What the hon. Gentleman said gives me the opportunity to peg in as a general point the fact that this debate is set against a backdrop of mood music that pensions are spiralling and are actually increasing, but the effect of the Bill is not to arrest pensions, but to cut them and to cut net contributions to pension schemes by 0.1% of gross domestic product, which is what the Government are saving. That, of course, is taken out of the pockets of many people who have worked hard for many years in our public services.

[Robert Neill]

The hon. Gentleman and I once worked out that we might have a very, very, very—however many “verys” we put into it—distant relative in common, but with every gentleness and respect, I would have to tell him that we do no good service at all to our public services by being unrealistic about the affordability of pension arrangements.

I talked about the intent with which we approach these matters and about honesty, transparency and being frank about the financial realities that underpin the schemes. This measure is a critical part of that. The most important service we can provide is to be frank and to produce a scheme, which I am satisfied the Bill does, that is financially sustainable for the future. We have talked about the technical issues, but the overall thrust of being financially honest about the affordability of our public sector pension schemes is absolutely critical—and the Government have got that right.

--- Later in debate ---

[Dr Whiteford]

I am afraid that I am not privy to the Scottish Government’s processes on this, so I cannot answer the hon. Lady’s question with any certainty whatever. What I can say is that the Scottish Government got clarity only a few weeks ago on the extent to which they can deviate from the proposals for England and Wales, and that the degree is quite limited indeed. I think the Scottish Government will have some flexibilities on accrual rates and some revaluation bases.

[Mr MacNeil]

Will my hon. Friend give way?

[Dr Whiteford]

I will not give way to my hon. Friend at the moment because I want to make some short remarks in this part of the debate, and save my fuller comments for later.

The Scottish Government also require explicit consent from the Treasury for any cost-sensitive changes to the NHS or teachers schemes.

Will the Minister accept my amendment and recognise how tight the time scales are, given the complex range of responsibilities—varying responsibilities relating to different schemes—and how tough the negotiations are? Not all partners to the negotiations even accept the need for this set of reforms. In 28 months’ time, when the provisions would otherwise commence, the Scottish Government would have had not only to complete the negotiations and prepare and pass legislation, but ensure that the employers and scheme administrators could prepare their systems and processes before the 2015 deadline.

This is a very technical amendment in some respects, but it is a very important one. I hope that the Minister will have listened carefully and will be pragmatic in his response to it later.

--- Later in debate ---

[Mr MacNeil]

In respect of this Bill and the commitment to public sector pensions, what change in GDP are we likely to see?

[Mike Freer]

I am not qualified to judge that. I am not an economist, so I do not have information about the impact on GDP. It might be appropriate to ask the Economic Secretary that question, however.

--- Later in debate ---

[Mike Freer]

My hon. Friend makes a good point. The pensions time bomb is not only to do with the fact that people are making insufficient provision; it is also about there being insufficient taxpayers to make up the gap between the contributions made by employer and employee and that gap having to be made up from general taxation. There are two parts of the time bomb, therefore. Unless accurate information is provided on pensions, people will not be able to make the appropriate decisions.

[Mr MacNeil]

Will the hon. Gentleman give way again?

[Mike Freer]

As long as the intervention is not a question about GDP.

[Mr MacNeil]

In terms of the provisions in the Bill, the House of Commons Library informs us that this time bomb will be cut from 1.6% of GDP to 1.5% of GDP.

[Mike Freer]

I am not sure what point the hon. Gentleman is making. After our debate, I may have to check whether I have said something that I cannot remember saying, and I apologise that I cannot respond to that point at present.

The House spends a huge amount of time regulating. The Food Labelling (Nutrition Information) (England) Regulations 2009 spell out in considerable detail the information that must be on food labels. The labels specify for consumers the fibre content, edible carbohydrate polymers, synthetic carbohydrates, salt content, kilojoules and calories, sugar content, fatty acids of trans fatty acids, yet when we ask people to make choices about their pensions, which is one of the biggest decisions of their life, we give them no information at all. I urge the Economic Secretary to go further by ensuring accurate information is included in our pension statements.

Fuel Duty

Angus Brendan MacNeil Excerpts

Monday 12th November 2012 Commons Chamber

[Cathy Jamieson]

I hope that when he goes back to his area, the hon. Gentleman is able to explain to his constituents why he has not backed the motion tonight.

[Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)]

The hon. Lady said at the outset that this is not the time to put up fuel duty. Will she tell us whether, each and every time Labour put up fuel duty over the past 13 years, it was the right thing to do, or do we have great joy in heaven with the repenting of the Labour hordes this evening?

[Cathy Jamieson]

Once again, I am rather disappointed with the hon. Gentleman’s approach. I should have thought that he, too, would want to be able to go back and tell his constituents that he had supported a motion to ensure that the rise did not go ahead. The tax on a tank of petrol at the general election was £37.60. It has now risen to £40.30, and if the 3p rise goes ahead on 1 January it will rise again to £42.20.

--- Later in debate ---

[Sajid Javid]

My boss is in Brussels on Government business. The hon. Lady’s boss is probably too busy cooking lasagne for someone. As usual, he is busy chasing the headlines and has left her to pick up the pieces.

Rising living costs have made life difficult for millions of households. I know that first hand. Like millions of others, I have lived under financial distress, so I know what it is like to worry about paying the bills and living within a tight budget, and the Government know about that, too. Times are tough. We inherited the biggest deficit in the developed world and the largest in our peacetime history, and international commodity prices continue to rise, raising the cost of living. Since May 2010, the price of wheat is up 72% and the price of Brent crude is up 31%. While talking about commodity prices, I note that the price of gold is up 40%. Had the previous Prime Minister, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), not recklessly sold off the nation’s gold reserves, our country would be £10 billion richer. That is money we could have used to help hard-working families.

To clear up the mess left by the Labour party, we have had to make tough decisions, but we have prioritised the cost of living wherever we can. We have cut income tax, frozen council tax, capped rail fare increases and, moving on to the Opposition’s motion, we have delayed and cancelled the fuel duty rises that they supported.

[Mr MacNeil]

The Minister states that the price of wheat has gone up. Bread and butter prices have clearly increased dramatically. Is this not exactly the wrong time for the Government to put 3p on the price of a litre of fuel?

[Sajid Javid]

That is exactly why the Government have taken action on the cost of living, which I will move on to shortly. Let me first talk about the Labour party’s record. It will not admit that it delivered the biggest deficit in the developed world. The shadow Chancellor said only three weeks ago that under Labour

“there was not a structural deficit”.

In fact, there was a structural deficit of £71 billion in 2007-08—more than 5% of this country’s GDP. We should thank him. Whenever anyone might need reminding why the Labour party must never be allowed to run this country again, the shadow Chancellor steps up to the plate—and this motion is another reminder.

Air Passenger Duty

Angus Brendan MacNeil Excerpts

Thursday 1st November 2012 Commons Chamber

[Priti Patel]

The hon. Lady makes a valid point. I have no doubt that right hon. and hon. Members recognise the global trends and the direction of travel when they see the rise of super-hubs and big business destinations, such as Singapore, Dubai and Mumbai. There is certainty around their aviation and economic strategies, and we are competing against many big international centres. We must remain competitive to survive. Tax rates that are higher than those in other economic centres put businesses off when they are making investment choices and decisions. Attracting foreign direct investment is an essential component of the Government’s plan for growth, and current APD rates are a barrier to foreign investors who are looking to expand into the UK.

[Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)]

The hon. Lady is making a great speech. Does she agree that APD, as a gateway tax, sends a signal and puts down a marker, and leaves a bad taste in the mouth for many who are thinking of coming to the UK? Their first taste of the UK, and the first piece of information they have about it, is the very high-tax regime to get into the country.

[Priti Patel]

The hon. Gentleman makes a valid point on how counter-productive taxes such as APD are when it comes to inward investment and the attraction of Britain as a place to do business.

Martin Craigs, chief executive of the Pacific Asia Travel Association, has stated:

“The UK is an island trading nation, air services are the vital lifeblood of modern global commerce. The UK Air Passenger Duty is now the world’s highest by a wide margin. It is certainly turning away tourism and trade from the world’s fastest growing economic region”,

which, of course, is Asia-Pacific.

APD also acts as a deterrent to British businesses that are looking to exploit lucrative business opportunities elsewhere in the world, and particularly in emerging markets. Businesses in my constituency, including small and medium-sized enterprises, provide more than 80% of local jobs. They are hit hard by APD. They want to export more, but APD is a barrier.

--- Later in debate ---

[Mr Brady]

I do not always agree with the hon. Gentleman, but I am pleased to agree with him about that. This tax precisely targets investment and international trade, which are exactly the things that the United Kingdom needs to focus on if we are to grow our way out of the problems we face.

[Mr MacNeil]

The hon. Gentleman said that Northern Ireland is competing with the Republic of Ireland, but surely we are all competing with the Republic of Ireland and with each other. We had better make sure we have that mindset; otherwise we will be left very much in the slow lane.

[Mr Brady]

That is absolutely right. Unlike the hon. Gentleman, I hope we will not be competing internationally with Scotland in the near future, but if we are, I hope we have lower aviation duty. The regional effects—on Scotland and Northern Ireland, but also on airports in the north of England—are clear. There is a plain and unanswerable case.

Like my hon. Friend the Member for Witham (Priti Patel) and the right hon. Member for Wythenshawe and Sale East (Paul Goggins), I want to touch briefly on the impact on families. Air travel should not again become a luxury that only the rich can afford. It is not a luxury in the modern world. Air travel, whether for business or leisure, is an essential part of modern life. It has opened up the world, opened people’s minds and enhanced the quality of life for us all.

I have said that I am confident that my hon. Friend, being such a good Minister, will respond warmly to the case we are all making. The final reason for that is that the proposers of the motion have been so modest in their aspirations. The motion highlights some of the damage that we think is being done by this tax, but we do not call for it to be cut or axed altogether. We are asking only for the Treasury to look carefully at its effect before next spring’s Budget. All we want is a proper detailed review and economic assessment of whether this tax does more economic harm than good. I think that all who have spoken so far believe it does.

[Mr Brian H. Donohoe (Central Ayrshire) (Lab)]

I congratulate the hon. Members for Witham (Priti Patel) and for Crawley (Henry Smith) on securing this debate. As a co-sponsor of the motion, as well as a seasoned and regular air traveller, I apologise to the House: because of the inclement weather coming in from the Atlantic, I shall try to rush back to Scotland this evening rather than waiting, or having my constituents wait until tomorrow afternoon before they see me.

I do not know whether I was targeted, but as chairman of the all-party aviation group I certainly received my fair share of correspondence on the petition connected with this debate. Indeed, I do not believe I have ever been contacted by as many constituents on any subject in my time in this place, and I have been here for some 20 years. As has been mentioned, the all-party group instigated an inquiry, not only into this tax but into the whole question of aviation and its future in the UK. It was clear from that work—a fairly major inquiry, with some 50 submissions and two oral evidence sessions—that we are likely to damage the whole UK economy unless we get this tax right. That was clear to me and the all-party group, with all conclusions supported by all parties in the House that were part of the inquiry, which is a first when it comes to the future of air traffic.

A report is available, and if hon. Members ping me an e-mail, I will send them a copy, if they have not already read it. The report has been sent to the Prime Minister and a fairly sizeable number of Treasury civil servants have asked for a copy, as a consequence of which I presume that the Minister is aware that the report is in existence. If he has not done so already, I would ask him to look at it, because we still await a response from Treasury officials and the Minister. There is overwhelming support from all sections of the House; indeed, we have already heard—as I am sure we will hear again this afternoon as we approach 5 o’clock—about the disadvantages of air passenger duty, as well as the evidence for those disadvantages. The vast majority of submissions received stated that the UK was being placed at a significant competitive disadvantage as a result of the tax. That applied to 43 of the 51 submissions, which I suggest is overwhelming.

But—and it is a big “but”—it is impossible to draw a comprehensive picture of the national economic impact of air passenger duty without Treasury support in looking at the issue far more closely. I am looking for that support from the Government this afternoon, and I also hope to see their response to the report sooner rather than later. The report also mentioned reports from the British Chambers of Commerce and from Oxera. They were good reports with credible data sources, but they were selective. We need a comprehensive assessment of the effects of the tax, and that is a task for the Treasury to undertake.

There are examples of air passenger duty leading to direct commercial loss. We have already heard my right hon. Friend the Member for Wythenshawe and Sale East (Paul Goggins) talk about Manchester airport, and say that AirAsia X cited ever-increasing taxes as its primary reason for abandoning its flights to UK destinations. I have been given other examples as well. It is a matter of public record that Continental Airlines, now part of United Airlines, would have abandoned flights from Belfast to the United States had the level of APD not been reduced in October 2011.

If only some thought could be given to the idea of regional variation, as my hon. Friend the Member for Linlithgow and East Falkirk (Michael Connarty) said. That would have the greatest effect on the regions in question. Only yesterday, Aberdeen, Glasgow and Edinburgh airports called for immediate action on the levy. They estimate that, by 2016, £210 million less will be spent each year in Scotland because of the tax. Glasgow airport’s managing director, Amanda McMillan, has said that APD

“will continue to damage Scottish aviation by making routes unviable and decimating Scotland’s links to the rest of the world.”

As my hon. Friend the Member for Ayr, Carrick and Cumnock (Sandra Osborne) said, the problem is also affecting my own airport at Prestwick.

[Mr MacNeil]

Given the quote from the managing director of Glasgow airport that the hon. Gentleman has just read out, does he support the Calman commission’s recommendation that air passenger duty should be devolved to Scotland?

[Mr Donohoe]

The hon. Gentleman might well be shocked by this—indeed, I expect him to fall off his seat—but I do actually support that proposal. I would suggest, however, that any such duty should not be frittered away, as many of the tax receipts obtained by the Scottish Government are. I would suggest that, if it were devolved, it should be hypothecated so that the money could be put into the airports, rather than into some of the other high-falutin’ schemes that happen north of the border at present—[Interruption.] I do not know what the hon. Gentleman is saying from a sedentary position, but I will give way to him again if he wants to intervene.

[Mr MacNeil]

Surely the idea behind devolving APD would be to cut it to make Scotland more competitive.

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. I warned the hon. Member for Na h-Eileanan an Iar Mr MacNeil) that he would be at the bottom of the list, but there is a danger that he will fall off the list because the amount of time available is disappearing.

--- Later in debate ---

[Dame Anne Begg (Aberdeen South) (Lab)]

I support the motion in the name of the hon. Member for Witham (Priti Patel) and others. Aberdeen depends greatly on the airlines, and especially on connecting flights. If the hon. Lady thinks the situation is bad in Essex, she should consider what it must be like for my constituents. Her constituents—and others who live within easy reach of London—have some choice in how to get out of the country; they can travel by Eurostar, for instance. From Aberdeen, however, it is impossible to get out of the country without either flying or spending a very long time travelling.

APD’s great impact on my constituents’ lives is highlighted by the fact that I received more e-mails about the fair tax on flying campaign than any other MP. Although it is good that 800 or so constituents got in touch with me, I do not necessarily want to thank them, because I received half of those messages in a two-hour period one afternoon after British Airways sent out an e-mail to all its executive club members. I thought I was under cyber-attack because my computer went mad; it started constantly pinging. In all the years I have been an MP, this is the issue on which I have received the most e-mails.

Other Scottish Members have mentioned a report published today by York Aviation, which was commissioned by Scotland’s largest airports. Derek Provan, the managing director of Aberdeen airport, said:

“This report shows, quite simply, that APD is damaging Scotland. It is damaging our economy, our tourism potential and our ability as a nation to bounce back from the recession. It limits our opportunities for growth in the employment market, costing as much as £50 million in the process.

At Aberdeen Airport we run a real risk of losing around 200,000 passengers by 2016 through this damaging tax. Each recent increase in APD has had a dramatic impact upon what we, as airports, have achieved and could have achieved without APD. It is imperative that the UK government undertake a detailed and comprehensive review into APD with the utmost urgency, and at the very least freeze APD whilst that is taking place.”

So both Aberdeen airport and other airports in Scotland are being affected because of not only the level of APD, but its existence and the way it acts as a disincentive to those furthest from the hub airports.

[Mr MacNeil]

Does the hon. Lady agree with her colleague the hon. Member for Central Ayrshire (Mr Donohoe) that APD should be devolved to Scotland?

[Dame Anne Begg]

Whether or not APD is devolved to Scotland, the problem we face is the level of APD and the way it is operating. Just because a tax is devolved, does not necessarily mean it would be treated any differently in Scotland—

[Mr MacNeil]

I think it might be.

[Dame Anne Begg]

It might be, but it could be treated differently down here, too. The problem I have with devolving some of the taxation that the hon. Gentleman would want devolved is that, as we know, the Scottish Government have a huge hole in their budget. So in terms of their priorities and how they spend their money, there is a fear that they would see APD as an easy cash cow, as indeed the Westminster Government do. There is no guarantee that a devolved APD would be any different from the one we see here.

[Mr MacNeil]

rose—

[Dame Anne Begg]

Mr Deputy Speaker is shaking his head, so perhaps I should not allow the hon. Gentleman to come back in, because we are getting away from the points I wish to make.

Most people who fly out of Aberdeen connect to other routes. Although lots of the flights from Aberdeen go to other domestic destinations, many of the people on the planes—the ones that the right hon. Member for Gordon (Sir Malcolm Bruce) and I are on every week—come to London to connect on to another route. I would like there to be a lot more direct flights from Aberdeen, but that, like the debate on the devolved nature of APD, is an issue for another day.

At the moment, most people in Aberdeen who want to travel abroad have to connect through one of the major hubs. The Government are making it particularly difficult to make Heathrow attractive as that hub. It is important for the British economy that Heathrow remains the main hub and that it is through Heathrow that all the traffic going out of the UK is filtered. There are two main reasons why Heathrow is becoming less and less attractive. The first is the system of APD, as anybody connecting through Heathrow is inevitably caught one way or the other. If they have booked their flights in separate lots they get a double-whammy, and if they have a through-flight, they still end up paying APD. Secondly, it would be remiss of me if I did not mention that part of the reason for Heathrow’s unattractiveness is the congestion there because of the lack of a third runway. People in north-east Scotland strongly support the building of a third runway at Heathrow.

Those two things, put together, mean that people in Aberdeen, and possibly in Edinburgh and elsewhere, are more attracted to using other airports as the hub through which to transfer. For people from Aberdeen that means going through Schiphol or Paris—and Lufthansa now has flights on to Frankfurt. Those who book the different parts of their journey separately pay only one part of APD—they do not pay APD on their full flight. So financially that approach becomes much more attractive. The consequence is business loss not only for Heathrow but for the UK carriers, who are suffering the most. That is a real problem and a shame.

We know that there is often no option other than to fly out of Aberdeen. We do not have an electrified rail service north of Edinburgh and we do not—and probably will never—have high-speed rail. It might get to Manchester, it might get to Scotland, but it is unlikely ever to get as far as Aberdeen. It takes too long for us to get a train to the Eurotunnel, so many people are affected by the rise in APD. This does not just affect business travellers. Aberdeen airport survives because we have a very buoyant economy in the north-east of Scotland because of the offshore oil and gas industry, but that economy will not be enough to support the airport if the Government are intent in undermining much of that travel through the increase in APD.

Many business travellers come through Aberdeen and they want to be connected to the whole world, not just part of it. They want to be able to fly through Heathrow and go on to some of the emerging markets, which often also have oil and gas. That is why it is important that the Government should listen to this afternoon’s debate.

--- Later in debate ---

[Mike Crockart (Edinburgh West) (LD)]

I add my congratulations to the Members who secured this debate, not least because the motion is supported by a large number of Members across the whole House. I should declare a particular interest, as Edinburgh airport—voted best European airport 2011 in the 5 million to 10 million- passenger category—lies within my constituency. As a result, I recently took part in the all-party aviation group’s inquiry, which was mentioned by the hon. Member for Central Ayrshire (Mr Donohoe). Its report made 15 recommendations, four of which related directly to air passenger duty and mirror the tone of the motion.

When APD was introduced in 1994, I do not think that anyone foresaw the likely levels that it would reach 18 years later. The problem is that in those intervening years insufficient notice has been taken of whether those levels were reaching what Gordon Dewar, the chief executive of Edinburgh airport, has described as a tipping point at which they have a detrimental impact on the economy as a whole.

As the hon. Members for Crawley (Henry Smith) and for Blackley and Broughton (Graham Stringer) said, it is sometimes argued that APD is an environmental tax. Perhaps before the inclusion of the aviation sector in the EU emissions trading scheme, that was a valid argument, but it is far more difficult to make it now. If the tax were levied on a per-plane basis to encourage higher occupancy, or if its levels reflected the fuel efficiency of the planes involved to encourage airlines to upgrade their stock, then perhaps that argument could be made again, but as it stands APD is simply a revenue raiser—and an attractive one to the Treasury, at that, because it is easy to administer, has low collection costs, and to a large extent it is hidden from the end consumer. Nevertheless, the Treasury must examine it to ensure that its overall impact on the UK’s tax take is positive, not negative, as seems to be the case.

[Mr MacNeil]

Would the hon. Gentleman support the devolution of air passenger duty to Scotland, as some Labour Members seem to do?

[Mike Crockart]

I almost thank the hon. Gentleman for his question, but it is a bit of a broken record and tangential to this debate. Devolution of this tax would merely recreate the problem that existed between Belfast and Dublin; my constituents would get in their cars and drive for two hours to use Newcastle instead. We have already heard the argument about regionalisation of APD, which is a far better and more efficient way of dealing with the problem.

Levels of increase in APD over the past five years stand at between 160%, for the bottom rate, and up to 360% for band D long-haul flights. Many submissions to the APPG’s inquiry, and others made since, including one that I received yesterday from the Federation of Small Businesses, make the case that levels of APD are now putting the UK at a competitive disadvantage in relation to other European and global destinations. The evidence is that that shows itself in a number of ways.

First, APD acts as a disincentive to foreign carriers using UK airports as destinations. A number of hon. Members have mentioned the report by the Scottish airports on their perceptions of the effects of APD. It shows that Scotland’s connectivity grew from servicing fewer than 40 destinations in 2001 to almost 150 in 2009, but the figure has slipped back in recent years to about 130. That hampers not only establishing new business markets, but bringing in new tourists to Scotland. The figure also compares poorly with other small European states. Of course, some of those states have major hubs, but Belgium has links to 220 international cities and Denmark has more than 150 such links.

If APD levels hold back local airports and their connectivity, they will also hold back the surrounding local economies. The Edinburgh airport campus employs 5,000 people and its activities support a further 2,000 across Scotland. It estimates that its contribution to the Scottish economy is £146 million, of which £118 million entered the Edinburgh city regional economy. The question must be: could it do more, if allowed?

One of the key debates on the impact of APD is about price elasticity, a phrase that takes me back to 1984, when I was studying economics at Edinburgh university. Different products have different elasticities—the rate at which demand is lessened by an increase in price. On the impact of APD rises, the report prepared by the three Scottish airports estimates that, accumulatively, by 2016 Edinburgh, Glasgow and Aberdeen will carry 2.1 million fewer passengers each year than if APD had not risen since 2007. Price elasticity is lower in Aberdeen, so the impact would be less, but it might still lose 200,000 passengers. Edinburgh’s higher number of low-cost carriers will result in a far higher potential impact—it might lose 1 million passengers per year.

Those are not just numbers; they are business men making connections and sales, and tourists spending money. The 2009 Civil Aviation Authority’s passenger survey suggests that about 36% of international passengers are visitors to Scotland and that 40% of domestic passengers are similarly inbound to Scotland. If we combine the drop in actual and projected numbers with the CAA figures and apply VisitScotland’s average tourist spend, we will see that the results are very worrying.

The 2007 drop in passenger numbers appears to have amounted to a £90 million per annum loss with regard to Scottish tourism. Following the 2009 APD rise, that figure has risen to £160 million and, if projections are correct, it will rise to £210 million per annum by 2016. This simply cannot continue.

Much of what I have said has come from the industry and some might say, “Well, they would say that, wouldn’t they?”, so I did a small internet survey last night via booking sites. I imagined myself as a business man trying to establish trade with some of the BRIC countries and looked at flying direct to Sao Paulo. A flight on 14 November from Heathrow would cost me a best direct price of £768, the APD for which is about £184. However, a direct flight from Paris, where the APD equivalent is €4, would cost £642—a saving of £126, which is more than enough to cover a Eurostar ticket. If I chose to start a business with Chennai, I could fly there with Gulf Air for £475, but the cost of a flight from Paris would be £240, which is almost half the price.

If I was a tourist heading to Las Vegas—this is the worst example—I could get the 11.20 Virgin Atlantic flight for £644, but if I travelled to Dublin for £17 I could get the exact same flight from there for £453. That is a saving of £191, for which, once I arrived in Las Vegas, would buy me the “hound dog” package, whereby Elvis would sing three songs to me and I could get a rose bouquet and be walked down the aisle. That would be an interesting use of £191. I think we can do better. When the taxation system causes such anomalies, it is not only Elvis who has left the building; common sense has left as well.

--- Later in debate ---

[Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)]

I note that no Member has spoken in favour of APD, which I think says a lot. In the midst of a recession, when the cult of austerity is starving the economy, taxes such as APD are bleeding the economy. That is not just my view; it is the view of those in the frustrated aviation and airport sector in Scotland, who see themselves as hostages of a Government policy here at Westminster that is damaging their sector and, by logical extension, the wider economy.

Amanda McMillan, the managing director of Glasgow airport, has said:

“Due to the size of the market in Scotland, we will always find it difficult to attain and sustain new routes, and this situation is compounded…further by APD which simply serves to artificially depress demand and dissuade airlines from basing aircraft here.

Unless APD is reformed, people travelling to and from Scotland—who must fly due to the lack of feasible alternatives—will continue to face some of the highest levels of taxation in Europe which is clearly a disincentive to travel.”

[Jim Sheridan]

If APD were devolved to Scotland, and Scotland then cut the tax, would there not be consequences for the Barnett formula?

[Mr MacNeil]

If APD were devolved to Scotland, the economy would grow. I should like all taxes to be devolved, so that the benefits of the policies introduced by the Scottish Government could go to the Scottish Exchequer. That is a logical extension, and it is what is happening in all the other countries. I am sure that, given the level of APD in the United Kingdom, no other country would be as foolish as the Government whom the hon. Gentleman supports at Westminster. He wants a Tory Government to have these powers over Scotland, and, given that he is a Labour MP, I find that quite shocking.

It is calculated that APD will have cost the Scottish economy £210 million in lost spending by 2016. So short-sighted is this policy that it will end up with our losing up to £50 million in other taxes through economic activity that will not take place. The Federation of Small Businesses has been damning of the UK policy on this tax:

“The Government’s determination to tax air passengers has resulted in a sustained negative impact on businesses as well as on leisure travel. IATA reported in June 2012 that UK passenger numbers have declined slightly over the past four years at a period when Germany, France and the Netherlands saw growth of between 2-4%.”

That must have damaged our economy.

The UK has embraced this tax in a helter-skelter fashion. It is regressive and it hits the poor disproportionately. It is a poll tax of the skies. It is felt less by millionaires in the Cabinet and elsewhere than it is by others.

Other countries have been wiser in their approach. Some countries that have introduced APD, such as Germany and Austria, have done so at a lower level. The Germans are economically canny, of course, and after they introduced it, they reduced it, rather than increasing it as the UK has done. We must welcome the fact that Aer Lingus is planning to fly to Edinburgh and therefore give us more choice, but there is still the handicap of high APD.

King Louis XIV of France was known as the sun king, and perhaps his sunny disposition was in part due to this quote from his Finance Minister, Jean-Baptiste Colbert:

“The art of taxation consists in so plucking the goose as to obtain the largest amount of feathers with the smallest possible amount of hissing.”

For the benefit of Members, I have translated that passage from the French. We have not had much of a sunny disposition from the Treasury for the past two years, but there has been plenty of hissing—and booing—in its direction.

Since 2007, APD has risen by 160% on short-haul flights and between 225% and 360% on long-haul flights. The Aberdeen Airport managing director has said:

“At Aberdeen Airport we run a real risk of losing around 200,000 passengers by 2016 through this damaging tax. Each recent increase in APD has had a dramatic impact upon what we, as airports, have achieved and could have achieved without APD. It is imperative that the UK government undertake a detailed and comprehensive review into APD with the utmost urgency, and at the very least freeze APD whilst that is taking place.”

Gordon Dewar of Edinburgh Airport adds:

“This tax has now hit its tipping point where the damage it is doing to Scotland far outweighs the benefits. This cannot stand and must be reviewed as a matter of urgency.”

No wonder people are concerned, especially as the Calman commission recommended this policy be devolved in 2009 and the MSP representing the Edinburgh airport area, Colin Keir, says:

“APD hits tourism and business and we need to have the power at Holyrood to maintain competitiveness with other countries and fairness to those travellers who have to use our airports.”

The economic mismanagement from Westminster is frustrating people, especially as this Parliament and Government will not devolve this policy to Scotland. I tell Parliament and the wider country, however, that in 2014 people will have a chance to have APD devolved and to give Scotland a competitive edge. After the independence referendum of 2014, I look forward to the devolution of APD, along with everything else, by one means or another.

--- Later in debate ---

[Sajid Javid]

I thank my hon. Friend for her intervention. I am pleased to hear that she has been glued to her television set watching this debate. I take her point about the Caribbean. Several hon. Members have made a similar point, and I have listened carefully.

[Mr MacNeil]

The hon. Gentleman has spoken about having a revenue-neutral tax. When the Government cut taxation from 50% to 45% for millionaires, did the revenue-neutral consideration enter into that equation?

[Sajid Javid]

Absolutely. I can assure the hon. Gentleman that the effects on taxation were taken together and that the Government had determined that the extra 5% was raising hardly any tax whatsoever.

Given that we have recently completed a comprehensive consultation on the subject, we have no plans for further reform at this point.

Public Sector Pensions

Angus Brendan MacNeil Excerpts

Tuesday 19th June 2012 Westminster Hall

[Richard Fuller (Bedford) (Con)]

It is a great pleasure to serve under your chairmanship, Mr Leigh, for, I think, the first time, and it is a particular pleasure, if I may say so Sir, to have the Economic Secretary as the Treasury Minister responding to the debate.

We live in a time when nation after nation is being told: “You are not as rich as you thought you were.” As a result, nation after nation is facing cuts—sometimes mild, sometimes severe—in the services their Governments can provide, the real incomes that their labour can earn and the value of their assets, calculated as the debt that can be raised against their businesses and homes. We are living in such times because for more than a decade nation after nation rapidly increased the amount of its borrowings as a proportion of its economy—its national leverage. It was not just excessive Government borrowing, but an entire national pastime undertaken by millions of households, companies and banks in many nations. That beggaring of future generations is now—sometimes harshly but ultimately correctly—being brought to an end, and it is in that context that we review a future fund, including how it may help and how it might fit with current Government policies.

So, what is a future fund? A future fund is shorthand for moving the burden of paying for public sector pensions from the current tax-as-you-go model to a proceeds-from-invested-capital, or fully funded, model. It is fair to say, and I am sure that the Economic Secretary will confirm this, that Lord Hutton’s recent review of pensions ruled out a move to a future fund. Like you, Mr Leigh, I do not have any wish to be a champion for lost causes, but I hope that I am able to make some strong points about why the Treasury should reconsider Lord Hutton’s proposal to move on and not make a transition in the way in which public sector pensions are funded. This is not about public sector pension negotiations or about changing public sector pensions; it is about the process that the Government undertake to fund the pensions.

I encourage the Economic Secretary and the Treasury to reconsider a future fund for three main reasons. The first is that it promotes intergenerational fairness, and reinforces the Government’s view about long-term thinking for the security of our economy. Secondly, it offers an opportunity to rebalance the structure of earnings, to restore emphasis on pension provision—deferred income—rather than on immediate income and, thirdly, it enables the creation of a UK sovereign wealth fund, to stimulate investment in long-term projects.

I shall take each reason in turn. First, on a future fund promoting intergenerational fairness, those of us of a certain age look back on our lives and, being part of a bulge bracket of population—some of us at the latter end of it—perhaps realise that we have taken a lot for ourselves and that, as a generation, we have been somewhat greedy on the nation’s resources. That is one reason why this Government came into office at a time of such enormous debts, which future generations will need to repay. One thing that guides me as a Member of Parliament is looking for ways in which we can use fiscal probity to unburden future generations of some of those liabilities. Let us be under no illusion: it will not be easy for our children and grandchildren to compete in the future world economy. It will be tough. We have new competitors coming up all the time, so they will need every advantage, one of which is to bequeath them lower taxation rates than they otherwise would have.

[Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)]

Does the hon. Gentleman consider the Norwegians to have been a great example of setting up an oil fund for future generations to ensure that their oil wealth was not squandered in one generation?

[Richard Fuller]

The hon. Gentleman makes an extremely fair point. I was not in Parliament in the 1970s, and I am not sure whether such points were made at that time, but clearly countries that have received the beneficence of resources—Norway is one example, and Australia another—have seen the value of looking at the long-term investment of natural resources, and have set up future funds to provide for future pension liabilities. The hon. Gentleman makes an excellent point in support of my argument. Of course, we are not as endowed with natural resources as those countries are, but the fundamental point about fairness between the generations is still solid.

Let us remind ourselves that the current level of public sector debt—the debt that we all talk about and are so worried about—is £1 trillion. The public sector pensions liability, which we do not often talk about, is £1.1 trillion. All those obligations have to be paid by future generations and, as we have so significantly ramped up this first amount of debt, should we not look for ways to reduce the unfunded part of public sector pensions for future taxpayers? A future fund would, over time, eliminate that burden from taxpayers and transfer it to the returns that would be generated from a funded pension scheme.

The Intergenerational Foundation has noted some questions about public sector pensions, and also some of the risks, and this change would reduce risk. At the moment, Lord Hutton’s proposals manage risk by way of a view of a cost ceiling on total public sector pension liabilities, which is based on projections of economic growth. The projections show the liability as a steady share of gross domestic product, falling in the long term. I am not sure that history is littered with Governments who under-predict economic growth; in fact, I think that it is often the other way around, with Governments having a rather rosy view of future growth. So, inherently, as we consider the risk that will fall on future generations, there is a likelihood that the Government, under current systems, will underestimate the liability that they are passing on. As Lord Hutton said:

“What we’ve seen is how very quickly the assumptions which underpinned my assessments of the long-term sustainability of public services pensions have been shown to be too optimistic…That is going to affect the sustainability of public sector pensions in a negative way.”

The change in the pensions structure would considerably eliminate that risk.

I shall now talk a bit about the second point, which is the rebalancing of the structure of earnings, to restore the emphasis on pensions. Over the past few decades, the role that pensions have played in the round of the compensation offer made to potential employees has reduced considerably and, I would say, undesirably. There is much more emphasis today on the immediate levels of compensation, on “How much will I earn this year?” rather than on “How much of what I earn am I putting away for my long-term retirement needs?”.

House of Commons statistics have tracked the active membership of occupational pension schemes for private sector and public sector employees, and have compared 1995 with 2010. Over that period, the number of public sector workers in such pension schemes increased, from 4.1 million to 5.3 million, but the number of private sector workers halved, from 6.2 million to 3.1 million. That was a halving in the coverage of occupational pension schemes in a very short period—15 years—which is why I say that the change has been dramatic. Being conservative, I like to see things in the round of their consequences. We are now seeing that many people fear that they do not have enough money for their retirement, and the Government have rightly recognised the need to encourage pensions through auto-enrolment programmes. This would be another measure that would encourage people by, as I shall explain in a minute, creating a floor on public sector pensions that would enable the focus to turn back to how pensions will be provided for private sector workers.

The third point is the role of a future fund in creating a sovereign wealth fund. To create a future fund, we have to fund it—and, boy, does it take a lot of money. If we have £1 trillion of liabilities, that is a lot of money to save up, so a long period is needed. The Australian future fund set a period of 14 years before money could be taken out: the law was passed in 2006, and no disbursements can be made until 2020. For the UK, taking a 20-year period, it would require a minimum of at least £20 billion a year—probably significantly higher than that; somewhere between £20 billion and £30 billion a year—fully to fund all the Government pension schemes over those 20 years.

To put that in context, that figure is equivalent to 3% of total Government expenditure. It sounds a lot, but the Government spend a lot—it would be 3% of expenditure—and it would be only half the money that the Government are spending on the interest on their own debt. It is therefore a manageable amount of money, even though the amount is significant. In addition to looking to fund that out of annual public expenditure, it would also be possible to make asset sales into the fund. In fact, the Australian future fund started with an asset transfer, from the sale of part of the telecommunications company Telstra, for its seed investment. I have checked—with the Minister here, I wanted to be absolutely sure—and the Government’s deficit reduction targets would not be imperilled by any future sale of assets going into a future fund. Quite rightly, if I may say so, the deficit reduction targets are set absent of any funds from the proceeds of the disposal of certain assets, such as those of Royal Bank of Scotland.

Some may say that taking £20 billion out of public expenditure when we are trying to create demand is a very odd suggestion, but of course the £20 billion would not be lost from the economy. Essentially, £20 billion would be transferred from current expenditure to an investment fund for long-term investment. That money would become a fund of resources that could be used to invest in long-term projects. If we take the Ontario teachers’ pension fund—I hope you will look it up later, Mr Leigh—it involves patient capital that is invested in long-term investment projects. It is there to secure the pensions of those wonderful teachers in Ontario; they are not quite, but almost, as good as the teachers in Bedford. It is there to protect their pensions, which it does by looking for long-term investment returns. It is the fund that seeded the money for Birmingham airport. If we had our own infrastructure fund set up as a future fund for public sector pensions, we could provide resources to fund long-term investment projects.

Let me say something that I rarely say, which is that I agree with the comments made by the Secretary of State for Business, Innovation and Skills, who spoke yesterday about the need for a significant investment in housing construction. Of course, we need other construction projects, but we understand that we are under fiscal restraints because we must demonstrate that our deficit is being reduced. I ask the Treasury team to consider this very carefully: in current market conditions, particularly with the constraints of fiscal responsibility and the lenient conditions for monetary policy, a future fund would be uniquely placed to provide the long-term patient capital to fund such infrastructure investments, without there being any challenge to the probity of the Chancellor’s deficit and debt reduction policies. This environment provides an opportunity to fund and seed a future fund with the resources from the Government’s credit easing or quantitative easing programmes, and that would happen in such a way that markets would see that it was matching a reduction in the country’s long-term public liabilities for funding public sector pensions.

Petrol and Diesel

Angus Brendan MacNeil Excerpts

Wednesday 23rd May 2012 Westminster Hall

[Robert Halfon (Harlow) (Con)]

It is a pleasure to serve under your chairmanship, Madam Chairman, and I appreciate what you have said. I have cut my speech down to allow for more interventions. The number of people here shows just how important the issue is, and I thank Members from both sides of the House for coming along.

I want to start by knocking something on the head. I welcome, as I am sure everyone here does, the fact that in the past few weeks petrol prices have come down a few pence, but families in my constituency still spend more on petrol than on food. The price of petrol is at an historic, all-time high. In Harlow, it costs more than 140p a litre, and that hits the poor twice as hard as the rich. People say that the price has come down, but it is a bit like a burglar taking £100 out of your pocket and giving you £5 back.

[Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)]

Does the hon. Gentleman agree that when a few pence comes off the price of a litre and the foot comes off the neck of the economy and of hard-working families, it is the wrong time for the Government to put that foot back again and squeeze the life blood out of the economy?

[Robert Halfon]

I am grateful to the hon. Gentleman. He supported me in the debate last year in which we managed to get the Government to postpone the January tax rise, and he will see from my remarks that I do not disagree with him.

Sir Terry Leahy of Tesco has said:

“Filling up the family car has gone up 70% in two years, causing what was a steady recovery to go sideways.”

I and most fair-minded people recognise that the Government have made significant progress, abolishing the previous Government’s fuel duty escalator, scrapping the planned hikes in 2011 plus a 1p cut in duty, with a partial fuel stabiliser and the freeze in fuel duty that I mentioned, in January this year. I firmly believe that the Chancellor shows an understanding of the matter, and that the Government must get credit where they deserve it, but we face considerable problems.

The first problem is the planned tax rise in August, which I ask the Government to reconsider. Secondly, we need a serious inquiry into the lack of competitiveness in the oil market, and possibly even a windfall tax on oil firms, to cut prices. Thirdly, there is the problem of the banks speculating on the price of oil.

--- Later in debate ---

[Miss Smith]

The hon. Gentleman will have heard me explain over the past few minutes that the Government have done something and that there are many other ways in which this Government need to consider what they do through the economy.

On the recent Royal Automobile Club report, which has also been raised today and in which my hon. Friend the Member for Harlow is interested, the Government announced in the Budget that they will consider whether vehicle excise duty should be reformed to support the sustainability of public finances and to reflect the improvements in vehicle fuel efficiency. The Government will, of course, seek the views of motoring groups before taking any decisions.

My hon. Friend also asked questions about the competitiveness of the oil market. As I think he knows, the Office of Fair Trading is undertaking research on pump prices on the Scottish islands, which are no doubt of interest to the hon. Member for Dundee East (Stewart Hosie). That work will help inform what further action, if any, may be appropriate elsewhere in the UK.

Several Members have asked whether other island and mainland areas could be included in the rural fuel rebate pilot scheme. It is a pilot scheme and nothing beyond its boundaries has been ruled in or out, but I have listened to what Members have had to say.

[Mr MacNeil]

I want to put it on the record that the pilot scheme seems to be working well. Indeed, I hope that it will be rolled out further and be made a permanent scheme in the future.

Finance (No. 4) Bill

Angus Brendan MacNeil Excerpts

Wednesday 18th April 2012 Commons Chamber

[The Economic Secretary to the Treasury (Miss Chloe Smith)]

To ensure that all hon. Members who wish to do so can speak in this debate, I intend to lay out extremely briefly what clause 189 and schedule 23 do and reprise at the end of the debate.

The clause and schedule make four changes to air passenger duty. First, they set APD rates for 2012-13, which took effect from 1 April this year, as announced in the autumn statement of 2011. Secondly, they extend APD for the first time to business jets and flights taken aboard other small aircraft. Thirdly, they give statutory effect to the reduced rate of APD on all direct long-haul flights from Northern Ireland, which was introduced in November. Fourthly and finally, they introduce the long-term solution of granting the Northern Ireland Assembly the power to set APD rates for all direct long-haul flights in future.

The changes provide certainty to both industry and the consumer. I commend them to the Committee and look forward to a brief debate.

[Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)]

I rise to speak to amendment 8 in my name and those of my colleagues, and I should like to press amendment 61 to a Division.

I am short of time, so I shall keep interventions to a minimum. There has been co-operation among the parties to try to give hon. Members time to speak, and I shall try to keep my part of the bargain.

In fact, I have risen to speak in favour of a Government policy—a well-thought-out policy that would do wonders for the economy. I am speaking, of course, of the devolution of air passenger duty to Northern Ireland. I like that great idea so much that I should like APD devolved to Scotland as well. We want equality of treatment and opportunity for Scotland.

In reality, I and many in Scotland, and the aviation industry, feel that APD is unfair and that it places an undue burden on business and travellers at a time when the Government should be encouraging the movement of people and goods to spur economic growth. The amendments in my name and those of my hon. Friends therefore propose to halt the rise in APD and devolve the power to Scotland, which is a recommendation not only of the Scottish Government, but of the Calman commission.

The idea of the cut in APD is simple: the UK already has the highest APD in the world, which surely cannot boost economic growth. The industry has had its say. Derek Provan, managing director of Aberdeen airport has said:

“Aberdeen, Edinburgh and Glasgow airports issued a joint letter to the Chancellor ahead of the Budget calling on the UK Government to create a level playing field for the UK aviation industry, which is subject to the highest aviation taxes in the world…The leaders of BA, EasyJet, Ryanair and Virgin Atlantic also jointly warned that the double inflation increase would hit ‘millions of hard working families in the UK.’ They said a family of four flying economy class to Australia would pay £500 in APD, whereas in 2005, they would have paid just £80. BA also recently revealed that it had plans to halve the number of new recruits in 2012 as a result of APD.”

Jim O’Sullivan, managing director of Edinburgh Airport, has said:

“APD is already costing Scotland passengers and having an impact on tourism revenues. We know from discussions with our airline partners that it is a major factor in their decision to connect further routes to Scotland. We would urge the Westminster Government to see Scotland as it does Northern Ireland and understand the need to both reduce and devolve this unfair and damaging tax.”

[Sammy Wilson]

I agree with much of what the hon. Gentleman has said about the general level of APD, but does he not recognise that this measure is the result of the climate change legislation passed in a previous Parliament which his party supported? The chickens are coming home to roost, with extra green taxes being imposed on poor consumers across the United Kingdom.

[Mr MacNeil]

It is not the taxes that are the problem but the level of the taxes, who is controlling them and what they are doing with them to stifle economic growth.

Furthermore, Amanda McMillan, chief executive of Glasgow airport, said:

“On the question of devolution of APD, Glasgow Airport has always been supportive of this proposal given the Scottish government’s more progressive approach to aviation and its greater appreciation of the role the industry plays in supporting the growth of the Scottish economy.”

[Charlie Elphicke]

Will the hon. Gentleman give way?

[Mr MacNeil]

I am sorry but there is no time. [Hon. Members: “Ooh!”] If I have time later and the hon. Gentleman wishes to intervene then, he may.

The Scottish Government Transport Minister, Keith Brown, said:

“We need to be able to deal with the competitive and connectivity disadvantages that Scotland faces and if APD were devolved now we could provide the means to incentivise airlines to provide new direct international connections to Scotland, benefiting our aviation industry and our passengers and supporting the growth of the Scottish economy. The UK government needs to listen to the many voices in Scotland who clearly want to see full devolution of”

the APD powers to Scotland. The Scottish Chambers of Commerce’s chief executive, Liz Cameron, said:

“Current rates of APD seem more suited to controlling capacity constraints at Heathrow than they do with the needs of regional airports, and devolution of this tax would afford the Scottish Government the opportunity to create an air transport package for Scotland designed to improve our direct international connectivity.”

A range of voices throughout Scottish industry and aviation are clearly calling for the devolution of APD.

We have been calling for the devolution of APD to the Scottish Parliament for some time. Most recently, we called for it to be part of the Scotland Bill, but unfortunately the Government and Labour opposed the idea. Today, however, we are arguing again for the devolution of APD in a different context. We do not need to argue the viability anymore, because the Government conceded that point in agreeing to devolve APD to Northern Ireland.

[Charlie Elphicke]

We have airports in Kent. Why should we not have regionalisation of APD for all regional airports? Why should it just be special pleading for Scotland?

[Mr MacNeil]

The hon. Gentleman makes a good point. I hope he will join me in the Lobby, because if it is good enough for Scotland, surely it is good enough for Kent. We are happy enough for it to be devolved to Kent if it wants it. We are not the type of people to want a power for ourselves that we would deny to others. We are not the type of people who would give it to Northern Ireland but not to Scotland.

The amendment is straight and to the point. It would allow the Scottish Parliament to set APD rates for Scotland. By passing it, under the rules in the Scotland Act 1998, the Treasury would redirect those specific funds to the Scottish consolidated fund instead of to a UK consolidated fund. With this economic lever, we in Scotland would have the ability to set our own rates, although owing to legal reasons we could not increase them—but frankly why would we? Higher rates of such taxes and the punitive fuel duty can only increase inflation and reduce productivity.

The evidence is growing in our favour. My office has discovered that Scotland has been getting the short end of the stick on non-EU flights. According to the Department for Transport, Scotland has only four non-EU direct routes—air routes that fly in and out of Scotland to a non-EU country. Let us compare that with our Celtic and Scandinavian neighbours. Norway and Ireland are connected to key emerging economies such as Russia, and Denmark is connected not only to Russia but to China, Japan and 24 other non-EU countries. Norway has connections with about 15 non-EU destinations, and Ireland with about 10, while Scotland is trailing with four. It is remarkable, given all this, that Edinburgh is such a successful financial centre. Arguably, Scotland was comparatively better connected in the days of the Icelandic sagas than it is now, with the Westminster Government controlling APD.

The UK Government are responsible for the negotiation of air routes with other countries. In short, Governments agree to routes in international air agreements and later decide where the routes go. In that capacity, the Westminster Government have failed Scottish airports. For more than 65 years, Governments have argued for more and more routes to the south-east of the UK, with only a handful making the road north of the M25. Devolving APD would take the pressure off Heathrow, with the calls for a third runway. Given that Monday is St George’s day, this measure would be almost a St George’s day gift from the SNP to the people of the south-east of England.

[Cathy Jamieson]

Before the hon. Gentleman moves on to other things, I wonder whether he might say a bit more about the relationship with his Celtic friends, as several amendments in this group affect Wales. Would it not make sense to look at the issue when the Silk commission reports, given that it is looking at a range of fiscal issues concerning Wales?

[Mr MacNeil]

I am glad that the hon. Lady seems to support devolving air passenger duty to Wales. Perhaps that could be extended to Scotland as well.

Without the ability to negotiate our own air routes, we therefore need other economic levers to attract businesses and travellers to Scotland. The current situation forces business and travellers to commute to Scotland via one of the most congested air hubs in the world. The south-east can absorb the impact of an 8% increase in air passenger duty. With the countless flights that go through London everyday, it would take a very severe drop in tourism indeed to affect travel through London. However, given that Scotland has already seen a serious decline in air routes—from BMI pulling out of Glasgow, as well as Ryanair—we have to think about the impact that the APD rise will have on us.

[Mr Reid]

I infer from what the hon. Gentleman is saying that if APD were devolved to Scotland, the SNP in the Scottish Parliament would want to cut it. Does he accept that that would mean less income for the Scottish Government, and if so, what cuts does he plan to make to services to make up for that?

[Mr MacNeil]

Perhaps I can expand the hon. Gentleman’s thinking. If we were to grow from four non-EU routes to 10 or 15, or to the 24 that Denmark has, we might see a growth in revenue. This is about raising revenue, not the precise level of taxation. We would be looking to raise revenue in Scotland and grow our economy, which is the plan for independence—indeed, it is why we want independence.

If APD is increased, Scotland will be put at a further disadvantage in attracting not only international passengers, but international business. As I said earlier, the Government have already conceded that point in devolving APD to Northern Ireland.

[Phil Wilson (Sedgefield) (Lab)]

The hon. Gentleman is being a bit disingenuous as far as Northern Ireland is concerned. The reason APD was devolved to Northern Ireland was because the airport in Northern Ireland was in serious danger of losing continental flights. Also, people were travelling to the south of the island, to Eire, to travel. The decision was made for economic reasons, to maintain the airport in Northern Ireland. It was nothing to do with the principle of devolution.

[Mr MacNeil]

It is not unusual to see Labour once again abandoning principle in its arguments. Surely we should be looking to allow Scotland to compete with other countries in the world. I hope that the hon. Gentleman would reflect on that.

[Brandon Lewis]

I appreciate the hon. Gentleman’s generosity in giving way. Does he not accept, however, that there is a simple logistical and geographical difference between Scotland, which is linked with England and its airports, and Northern Ireland, which is obviously competing with a fellow European Union member state? That alone is a big difference.

[Mr MacNeil]

As I have pointed out, our proposal would benefit the south-east of England as well as Scotland. Surely the hon. Gentleman can see that, given what Conservatives say about taxation.

[Phil Wilson]

Will the hon. Gentleman give way?

[Mr MacNeil]

I am sorry, but given the time I will take no further interventions.

Three airports support the devolution of air passenger duty, as do the chambers of commerce. They want it to be independently controlled in Scotland. They will be frustrated by what the House of Commons in London will probably do this evening, when I press amendment 61 to a vote. Frustration is a negative, but in my view this will have a positive outcome. Members who cannot yet understand the rising support for Scottish independence can surely see that those who are frustrated about APD this evening will begin to see a better way of dealing with the allied intransigence from London, on this and other matters, large and small. That will be one of the many reasons why people will vote for Scottish independence in 2014—to move the Scottish economy and Scottish connectivity forward.

I only hope that I have aided Members in understanding that this is not an SNP call: we are only a vehicle for the community of Scotland, along with the three airports and the chambers of commerce, in improving industry and creating better chances for families. The amendments in my name and those of my hon. Friends therefore seek to stop the increase in APD and to continue the pattern of devolving things to the Scottish Parliament, which is a more sensible locus for controlling air passenger duty.

[Cathy Jamieson]

I shall keep my remarks brief in order to give other Members an opportunity to speak. I have listened to the hon. Member for Na h-Eileanan an Iar (Mr MacNeil) and, as I said in an intervention, it is important that we should have an opportunity to look at this matter in the round. Given that a recent review of air passenger duty resulted in no changes being made, I hope that the Minister will take this opportunity to consider taking a further look.

Connecting Europe Facility

Angus Brendan MacNeil Excerpts

Thursday 19th January 2012 Commons Chamber

[Chris Leslie]

I did not quite hear that from the Minister. If that is the Government’s position—perhaps the hon. Gentleman has a hotline to the Prime Minister on these matters—I would be very interested to hear it.

I agree that the proposed budgets for EU institutions are still too high. Export refund practices have to be cut back. We have to change agriculture policy so that it is fairer to smaller farmers and ends the ridiculous tobacco and wine subsidies that are lavishing payments on some of the very wealthiest players in the wealthiest EU countries.

[Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)]

I wonder what the hon. Gentleman’s proposals might mean for crofters in the highlands and islands of Scotland.