Debate on the Address

Ann McKechin Excerpts

Wednesday 8th May 2013 Commons Chamber

[Simon Hughes]

No; many people’s living standards are not better than they were three years ago, but we have been dealing with what my right hon. Friend the Business Secretary calls the greatest economic heart attack we have had in his lifetime and mine. My constituents have seen, over several months, unemployment come down—not consistently, but there have been months when it has come down and youth unemployment has come down. They have seen an economy that is picking up. The construction industry in my patch is powering ahead; although I appreciate that it is not the same around the country.

But what my constituents have not yet seen, and what the Government are trying to deal with, is the inequitable opportunity and an inequitable distribution of the available wealth. One thing that the Liberal Democrats need to continue to argue for in the coalition, and which I hope the coalition will buy, is that we need to deal with the inequity in Britain whereby there are still people a mile and half from this building, in the City, and in Canary Wharf a bit further away, who have bonuses that are completely without justification, while there are many people on the minimum wage and struggling to get work. We need a redistribution of wealth—I am not ashamed to call for that—and a redistribution of the profits, and we need the banking industry to understand that it has to pay itself reasonable wages. The European Union has the right idea, in my view—not a view shared by the Chancellor—in seeking to make sure that we limit the bonuses given to people across the financial sector so that they do not, in effect, take far more than they deserve.

[Ann McKechin (Glasgow North) (Lab)]

The right hon. Gentleman talks about his passion for redistribution. It is one that I share, but can he explain why, in that case, he voted to abolish the 50p rate of tax for those who are paid £1 million and more? At the same time he voted for welfare reform and changes that are taking money from those on the very lowest incomes and from communities such as those that I represent, which are being utterly hammered, with millions of pounds being taken out of our local economy as a result. Does he consider that to be fair redistribution?

[Simon Hughes]

I voted for the income tax changes as a package that took many people on low and medium incomes out of tax altogether as a result of the raising of the tax threshold, and only when I was satisfied that people on very high earnings would pay more net. Yes, they had a reduction last month in their top rate of income tax from 50p to 45p in the pound, but with all the other changes that affect them they will make a bigger total contribution to the economy in tax. The hon. Lady knows what I am going to say next. I was here for all the time of the Labour Government, when for every single month apart from the last few weeks the top rate of tax was 40%—not 50%, not 45%, but 40%. The great socialist regime of Tony Blair and the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) did not deliver the great socialist nirvana, and that was the time when people in the banks were earning obscene amounts, the likes of which had never been earned before, and they were not dealt with.

On the welfare cuts, the Liberal Democrats argued strongly in the coalition that benefits should not be cut, but that with some inflation-lined exceptions there should be a limited increase this year of 1%. That is what the Government have tried to do. There are exemptions. Changes to housing benefit should not apply to any pensioner householder in the country. Some rates of increase of benefit for people with disabilities are higher than 1% to try to achieve equity. These are all attempts to deal with a welfare bill that is extremely high. It is not pleasant and I do not pretend that it is easy. We would all like to be able to give much more to people who are struggling, and I am very concerned that the bottom 20% should be the priority of this Government in their remaining two years. From the hon. Lady’s Front-Bench colleagues I have heard no answers as to how we pay our bills, deal with the fact that we are paying 120 million quid a day in interest on our debts, sustain the welfare state and encourage people back into work.

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[Ann McKechin (Glasgow North) (Lab)]

I very much enjoyed the speech of the hon. Member for Southend West (Mr Amess), but he will probably appreciate that I do not necessarily agree with many of his comments. On High Speed 2, I actually think that the Government are not ambitious enough. My personal view is that the line should continue straight up to Glasgow, and that we should start constructing it from both ends, as has happened with almost every other major construction of high-speed rail in the world. Then we would all be better together. Of course, there was a helpful “better together” paragraph in the Gracious Speech.

May I counsel the hon. Gentleman and a number of other Members who have spoken about referendums? Government by referendum will always end up with pausing and halting, as we find at the moment in my own country, where we have to wait a horrendous 500 days more before we can make a decision on a proposal that, of course, I will not support. I am sure the hon. Gentleman would take the same position, although unfortunately he will not have a vote. However, the way it halts all other debate when we need to make progress is something I deeply regret, and I counsel against those who are so keen to rush to referendums.

There is a pattern to the proposals in the Queen’s Speech, and the Government’s pre-announcements were as much about what was not included as the actual content. The failure to legislate for the plain packaging of cigarettes is possibly the most stunning example in the Queen’s Speech of a failure to govern in the national interest. This should not be a party-political issue. The evidence of harm is known, we accept that that harm is likely to be greater if someone takes up the habit in their early years, and we recognise the attractiveness of advertising as more likely to influence the young and impressionable. Other western countries have already taken a lead so it is not a step in the dark, and there is compelling evidence to suggest that such a measure will lead to significant savings in public health costs, as well as preventing many people from suffering avoidable illnesses and premature death.

What exactly are the Government afraid of? It is time for their special advisers to stop whispering in their ears about harming relations with large tobacco companies, and for them to recognise their wider duty to this nation’s children and their life chances. I hope they will reconsider their decision and bring forward legislation later in the Session. As many Members have pointed out, there is plenty of space in the timetable to ensure we get the legislation through by next year.

On the various issues concerning business and enterprise, the consolidation of consumer protection legislation mentioned by the hon. Gentleman is welcome and in part foresees the implementation of a recent EU directive. I welcome the fact that it will include updating the law on things such as online shopping. The Select Committee on Business, Innovation and Skills, of which I am a member, will take a closer look at those proposals in the coming weeks, but I regret that the legislation has not been used as an opportunity to tackle issues that our constituents talk to us about all the time: rising energy prices when global prices are falling and the profits of energy companies are rocketing; transport costs that often increase at three times the rate of inflation; and the growing number of payday loan shops, which are spreading like a bad rash up and down the high streets of our country.

I appreciate that there is an ongoing Office of Fair Trading inquiry into payday lending and a possible Competition Commission referral, but the pace of the Government’s response has been worryingly slow. The Committee’s report on the subject was issued more than a year ago, and the OFT subsequently identified problems with companies representing 90% of current market share in the UK. More and more people with severe debt problems have multiple payday loans, but there is still no sign of badly needed stricter regulation to bring some of the worst aspects of that business under proper control.

The OFT report earlier this year was utterly damning in its review of the industry. It stated that almost a third of loans taken out in 2011-12 had been rolled over at least once, and that those loans accounted for almost half of lenders’ revenues. Nearly 20% of revenue came from 5% of loans that had been rolled over four times or more. The obvious conclusion was that too many people were being granted loans they could not afford to repay, and it appeared that lenders’ revenues were heavily reliant on customers failing to repay their original loan in full and on time.

Our Committee’s recommendation last year to limit the rolling over of such loans was brushed aside on the basis that the Government were

“focused…on ensuring rigorous affordability checks are carried out before each and every roll-over”.

However, the OFT report clearly showed that this industry earned the greater part of its profit from doing precisely the opposite. The OFT found that only six of the 50 firms it visited could provide documentary evidence that they had assessed consumers’ disposable income as part of their affordability checks—and let us not forget that the OFT inquiry started after the industry stated that it would toughen up its codes of practice. As Ministers are well aware, more than one trade group represents that sector, and they do not represent all practitioners. Therefore, a voluntary approach was never going to provide the protection needed by some of the most vulnerable in our communities. This problem is not one of a few rogue traders, but of a malfunctioning sector that is causing real harm to thousands and trapping many in high levels of debt. It is not about more regulation, but about better regulation that actually tackles the problem.

The Government’s recent response of introducing advertising restrictions and allowing the Financial Conduct Authority to impose fines from next year will make a moderate difference but nowhere near enough to end the misery we are now witnessing across the length and breadth of our country. We need urgent legislation to place a strict cap on the number of roll-overs, and as suggested by our Committee, we should re-examine evidence from other parts of the world such as Florida, which successfully placed a cap on the amount that could be borrowed at any one time. Its high repayment levels should be our aim too.

Last year we had the benefit of a statutory-backed consumer’s voice in the shape of Consumer Focus, which put pressure on the Government on this issue. It was vocal in calling for speedy action but is now silenced as a result of the Government’s legislation. Voluntary bodies such as Citizens Advice, Which? and StepChange carry out a great deal of valuable work, but their services have been considerably stretched by the rapid increase in demand over the past few years from those experiencing high levels of debt. The need for a strong consumer champion with the same rights of access to the Government as powerful trade lobby groups has never been greater. I am sure we will return to the effectiveness of enforcement as we look in greater detail at the draft consumers rights Bill over the coming weeks.

During the Budget the Government published their response to the Heseltine report on growth, “No stone unturned”, which was favourable to many of its recommendations. The BIS Committee had the benefit of two evidence sessions with Lord Heseltine earlier this year, and I believe that much in the report could carry cross-party support and consensus. Despite the desperate need to grow our economy, however, there was precious little sense of urgency in the Queen’s Speech.

Most recommendations in the Heseltine review, including the creation of a single pot of finance to be spent locally and a call for further devolution, have—not surprisingly—been postponed until after the 2015 election, and putting the report out to grass shows how out of touch the Government are with the real needs of our country. One area of the report was completely ignored, but I believe it is crucial if we are serious about changing the way we support businesses large and small to deliver growth. In his report, Heseltine points out that there are few formal structures in our society in which we have a genuine dialogue between Government at all levels—national and local—and the business sector. The UK’s current business bodies represent only a small percentage of the total number of businesses—about 650,000 out of a total of 4.8 million—whereas the German Chambers of Commerce represents more than 3.5 million businesses. The UK arrangements have caused fragmentation and weakness in the business sector’s voice in government and in decision making. Businesses have a planned and comprehensive structure not only in Germany, but throughout the continent, in Japan and in north America. Lord Heseltine recommended a radical improvement in how businesses are engaged and supported at local and sectoral levels to ensure a co-ordinated business support structure.

The hon. Member for Mid Worcestershire (Peter Luff) and my hon. Friend the Member for Ellesmere Port and Neston (Andrew Miller) mentioned the lack of skills and the challenge we face in the coming years, particularly in apprenticeships. That reminds us that, if we are serious about improving our skills base, and if we want to bring ourselves up to the standards we witness in countries such as Germany, which offer sustained, high-quality, in-depth training to hundreds of thousands of young people every year, we need a business structure that can properly support such a change.

I note that it was reported earlier this week that several of our country’s largest employers are hoping to form a national framework to help school leavers and the unemployed into the labour market, including by delivering a comprehensive careers advice service. Such a move implies that the business community does not have much confidence that the Government’s approach to careers will provide the right advice or tackle the skills shortfall, which employers are rightly increasingly worried about. The move is welcome, but unfortunately it does not include the jobs and opportunities in the supply chains through the small and medium-sized enterprise sector, which are the heart of our economy. Unless and until we as a country can engage at a similar level with the vast majority of our businesses, we will simply miss out.

Finally, I should like to make some observations about the mortgage indemnity scheme proposal in the Budget. I have asked a number of questions of both the Treasury and the Department for Communities and Local Government, which operate the help-to-purchase schemes, about whether non-UK citizens will benefit from them. After a wait of more than five weeks, the Government have been unable or unwilling to answer my questions on that point.

There are serious difficulties with the mortgage indemnity scheme, which the Treasury Committee branded as a work in progress, adding that it might have a number of unintended consequences. This week, Andrew Brigden, a senior economist at Fathom Consulting, which is run by a former Bank of England economist, stated:

“Had we been asked to design a policy that would guarantee maximum damage to the UK’s long-term growth prospects and its fragile credit rating, this would be it”.

I spent 18 years in the property business before I came into the House, and I believe the policy is an act of complete and utter folly. It will place the taxpayer at considerable risk of fuelling rocketing property prices in the parts of the country that do not require it. At the same time, it fails to address the shortage of houses, which is at the root of the problem in our housing market. It does not change our housing market so that we have greater control in the long term over the private rented market and more stability, and it will not mean that people can buy houses when they can afford to do so. Many people, particularly younger people, no longer have types of employment that offer the security that gives them the confidence to buy.

Instead of the Government’s high-risk, casino-type methodology, I suggest that a better way is for the Government to invest in social landlords and councils to encourage them to build more houses. Such investment could mean that local authorities can borrow money perfectly reasonably and repay it at perfectly healthy ratios. That will allow us properly to tackle the housing crisis, which is at the root of many of the problems we encountered before the bank crash. Unless we are serious about them, they will occur again.