Amendment of the Law

Anne Begg Excerpts

Wednesday 23rd March 2011 Commons Chamber

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

At the end of every Budget speech, the Chancellor has to pull a rabbit out of the hat. I will begin my remarks on the rabbit that I was not expecting today. It is something that will affect my constituency. Because I have been sitting in the Chamber since the Chancellor made his speech, I have not been able to quantify exactly how it will affect my constituency, but I have great fears that it might have a devastating effect.

I should explain that as a Member for Aberdeen, the economy of my constituency is based on the offshore oil and gas industry. I should also explain that I am the chair of the all-party group on the offshore oil and gas industry. Aberdeen has survived the downturn probably better than anywhere else, because the oil industry has been fairly buoyant. Unemployment in my constituency has risen from only 1.9% to 2.5%. I appreciate that that will sound very good to many Members. I fear that because of the rabbit that the Chancellor pulled out of his hat, that may not continue.

I speak, of course, about the fair fuel stabiliser. I think that that has the potential to destabilise the offshore oil and gas industry quite dramatically. I appreciate that the Chancellor was looking for something so that he could bring down fuel prices. However, it appears from the Red Book that huge amounts of money will come from the North sea. Apart from in the financial year 2011-12, in which the amount that will be given back to the taxpayer is £1.9 billion and only £1.78 billion will come in from the North sea from the increase in the supplementary charge, in every other year more will be raised by the Exchequer from the North sea oil and gas industry than the Chancellor will give away by bringing down petrol prices.

[Helen Goodman]

I also noticed that very interesting line in table 2.1—line 28. It shows that the proposed revenue stream is the same in every year. However, as the Chancellor said, that will depend on the oil price. Unless he is absolutely confident that the oil price will remain at the same level throughout the period, these are completely unfounded forecasts and estimates.

[Dame Anne Begg]

Indeed, if the oil price goes up, the amount that the Chancellor gets will go up. These must at best be guesstimates. Therein lies the problem for the offshore industry. The North sea is a mature province, but there is still a lot of oil left. In fact, there are probably as many known oil reserves in the North sea today as there were in the 1970s, but they are much harder to reach and more challenging to get out of the ground. The one thing that the offshore oil and gas industry needs is stability—stability in what the Chancellor is going to do. The last time the tax revenues for the offshore industry were changed, by the last Labour Government, there was a slowdown in the industry for a good two years before it recovered. The industry complained about the unexpected nature of that change and the fact that it was not able to plan for it. This change comes into effect from 12 o’clock tonight, so it will come as a huge shock to the offshore sector that it will be affected.

[Mr Kevan Jones]

Does my hon. Friend recognise, given her expertise on the oil industry, that investment in exploration is long term? In some of the fields that she is talking about, planning and investment can take up to 10 years. A fluctuating oil price will make such decisions very difficult. That will have a direct impact on Tyneside and Teesside, which are strongly supported by the supply industry for North sea oil.

[Dame Anne Begg]

I could not agree more. In fact, I believe that 200 constituencies have 50 jobs or more that are directly related to the supply chain of the offshore industry. The change will come as a big shock out of the blue, and I do not think people are prepared for it.

As my hon. Friend suggests, in its long-term planning, the offshore sector tends to use an oil price of between $50 and $60 a barrel. In other words, it projects a stable oil price in its forward planning. That is clearly not the real situation, because sometimes the price dips below that level and sometimes, as at the moment, it goes up to $100 a barrel. The fluctuation of the oil price makes the sector’s long-term planning difficult, and the Chancellor has added another factor that will fluctuate, making the situation even less stable. To call it a fair fuel stabiliser is a complete misnomer.

[Brandon Lewis (Great Yarmouth) (Con)]

Like the hon. Lady, I represent an area in which the oil and gas industry is prevalent. Does she agree that the measures that the Chancellor has taken today deal with the problem that arises when there is effectively a windfall for companies because of oil prices? In the long run, the change will be neutral to the taxpayer and the companies will not be at a loss. It just deals with what are effectively windfall profits that they have received because of the current high oil prices, to the benefit of the consumer.

[Dame Anne Begg]

With all due respect, that is not how the Chancellor has sold it. Even if there has been a windfall, perhaps it would have been better had he given some warning of the change so that people in the oil industry in particular could have taken account of it in their planning.

When we look at the Red Book, we see that the change is not tax-neutral. It states that by 2012-13, the tax raised will be £2.2 billion, and that it will be £2.1 billion the following year. The Chancellor is expecting to raise more than £2 billion a year—a much larger amount than is being given back to the consumer who buys petrol at the pump. Line 6 on page 42 of the Red Book shows that the Chancellor is taking more from the offshore oil and gas industry than from the banks, by a factor of 10.

[Helen Goodman]

I am grateful to my hon. Friend for being so generous in giving way. The other interesting thing in those numbers is that whereas the Chancellor claimed that the banks would not benefit from the corporation tax change, we can see from the Red Book that corporation tax reliefs will rise over the period in question but the bank levy will absolutely collapse.

[Dame Anne Begg]

Indeed, the bank levy will come down to just £100 million by 2015-16.

The change to the oil and gas charge has come as a bit of a shock, and it worries me. From looking at the Red Book, I am getting more and more worried about what the Chancellor has announced today. The Red Book states:

“The Supplementary Charge on oil and gas production will therefore increase to 32 per cent from midnight tonight.”

There was no warning, and it will have come as a big shock to the industry. The effect could be dramatic in my constituency. I only hope that the Chancellor has thought the matter through and had some discussions with the industry. I suspect he has not, and I am worried about what will happen.

I wonder what other nasties are lurking in the Red Book. Last time it was the 10% sanction on housing benefit when someone had been out of work for a year, which we did not discover until days afterwards. I am glad that the Government have backed down on that and that today’s Red Book shows that money again.

From a cursory glance at the Red Book, I discover something that comes as a bit of a surprise to those of us who were here for Prime Minister’s questions today. The Leader of the Opposition asked the Prime Minister why the Government were taking the higher-rate mobility component of disability allowance from people living in residential care. Those who were here will remember that the Prime Minister replied, “We are not”—a simple, straightforward answer. However, line d on page 44 of the Red Book is about the plan to

“remove mobility components for claimants in residential care from April 2013”,

with a figure of £155 million to be saved. That is different from the last Red Book, which stated that the change would come in in 2011-12 and save £135 million. All that the Government have done is delay it by two years. As the Leader of the Opposition pointed out, the change is still in the Welfare Reform Bill, and here it is in the Red Book. Perhaps the Prime Minister might want to come to the Chamber and apologise for not having been as accurate as he might have been.

[Richard Fuller]

For clarification, has the hon. Lady checked the following page, page 45, which mentions the disability living allowance reform gateway funds, which will kick in at £360 million in 2013-14 and rise to £1.45 billion? How does that match the figures that she has given, if at all?

[Dame Anne Begg]

They do not match, because they are totally different things. In fact, the Prime Minister did not quite understand that. The DLA gateway is about tightening up the criteria for those coming on to DLA. That will come in with the introduction of personal independence payments. The reform of the gateway is totally different from taking DLA away from people who live in residential care. By any criteria, such people would qualify to get through the gateway. The Government have decided that they will not get the money because they live in residential care, not because they do not fit the criteria.

[Richard Fuller]

I am grateful to the hon. Lady for that clarification. I am sure she will recognise that there are hon. Members on both sides of the House who share concern about the continuation of the mobility component of DLA. I believe that Ministers are looking for a way to both maintain the mobility component and expand personal payments, so that people with disabilities who live in care homes continue to receive the funding that they require for a decent living. If that is not included in the Budget, I will be very interested to talk to her about it.

[Dame Anne Begg]

What I have said is based on a cursory glance at the Red Book, but the evidence from the Welfare Reform Bill, which states that those in residential care will not get higher-rate mobility DLA, and from the Red Book makes it appear that the Government still intend to take the mobility element away from such people, albeit two years later. Those of us who said that the proposal was unfair thought we had won the battle, but it now appears that we have not won it at all. I am grateful to the hon. Gentleman for his intervention, because I know that Members of all parties objected to the proposal. I hope that he will put pressure on his Government to reconsider the matter.

I wish to say a wee bit about the merging of national insurance and income tax. It was trailed slightly in the press, but we needed to find out what it meant in reality. The Chancellor said it would not be the end of the contributory principle, but it is very hard to see how it cannot be. There needs to be a debate about the future of that principle, because other measures that the Government have taken have undermined it. People are quite shocked about what is happening, having paid their national insurance all their lives thinking that they were paying into an insurance scheme and that they would get money out of it when something went wrong. People get only six months’ jobseeker’s allowance of £65 a week as a result of their NI contributions when they are unemployed. Under the Welfare Reform Bill, people will get only one year’s sickness benefit under the new employment and support allowance as a result of such contributions. Most people assume that they get the basic state pension because of their NI contributions. That is the big one, because people are quite happy to pay their NI contributions for that, but the Government plan to introduce a flat-rate, £140 a week state pension. Such contributions pay for the basic state pension state and the earnings-related pension scheme as well as pension credit, and everything then gets divided out.

It is difficult to see how pensions can be based on a contributory record, as the Red Book says they are, if everybody gets the same. The Work and Pensions Secretary said a couple of weeks ago that he will introduce the flat-rate pension, and that that will help women, but it will do so only if it is not dependent on contributions. The Government cannot have it both ways. Either people get the flat-rate pension based on their working record and NI contributions, which will be part of income tax, or they get it because they have fulfilled other criteria, such as residency. The country and all parties in the House need a proper debate on how we fund welfare, the basis of our welfare system, and the future of the contributory principle.

[Lorely Burt (Solihull) (LD)]

The Liberal Democrats take pensions very seriously. I acknowledge that a lot of consultation and working out must be done, but does the hon. Lady welcome a basic state pension of £140 a week?

[Dame Anne Begg]

I advocated a universal or citizens pension as a Government Member for many years, but one strong argument against such a pension is that many people are very attached to the contributory principle. That came out in the original discussions, when the Government of the day decided to reduce the state pension qualifying years down to 30 for both men and women.

Part of the problem in this country is that we have no means other than NI contributions by which to determine who should qualify for a state pension, because we do not keep residency records, which is how the judgment is made in, for instance, New Zealand. The problem in this country is more complex than it may seem.

The state pension age is about to go up to 66 for men and women by 2020. This was meant to be a Budget for growth, but the very first thing the Chancellor spoke of was the downgrading of the growth figures. I am worried about where all the jobs will come from given the increased number of people in the workplace. The numbers in the work force are expected to increase because of the new work obligations on jobseeker’s allowance claimants; because lone parents will be expected to look for work when their youngest child is five; because 30% of incapacity benefit claimants will be assessed as fully fit for work and expected to go into the workplace; and because another 30% of such claimants will end up in the work-related activity group of employment and support allowance. Huge numbers of people are expected to go into the workplace. It is difficult to get figures on how many more people will be looking for work because the Department for Work and Pensions could not give them to us, but on top of those, the raising of the state pension age means that even more people will be looking for work.

[Mr Kevan Jones]

The Chancellor trumpeted the extension of support for mortgage interest, but has my hon. Friend seen page 42 of the Red Book, which says that that will continue for 2012-13, but decrease in 2013-14 to £15 million and then to zero in 2014-15?

[Dame Anne Begg]

I was going to talk about housing, but I could speak for another three hours if I go down that route, so if my hon. Friend will forgive me, I shall resist.

Will older people who have not reached state pension age be in work or not? At the moment, only 30% of men are still in work aged 65—not only because of early retirement and other things, but because people lose their jobs towards the end of their working lives—but they will be expected to work another year. Only 47% of women aged 60 are still in work, but they will be expected to work for another six years. Those people will not necessarily get anything under the universal credit, because they will probably have saved a nice little nest egg—a nest egg of just over £16,000—to see them through retirement. They will not get jobseeker’s allowance—or rather, they might get it for six months, but that is all they will get through the contributory principle. If they have fallen out of work because of ill health, the most that they might get is a year of employment and support allowance before then getting nothing. Those are big figures, and that is where a lot of the welfare reform savings in the Red Book will come from.

Indeed, it is perhaps worth alerting the House to the fact that the big savings in welfare reform do not come from getting “shirkers” back into work; they come from taking money from those who would normally have got contributory incapacity benefit, but will now get only contributory employment and support allowance for a year. That means that around £80 a week will come out of those people’s incomes. They will get nothing else if they live in a household with someone in work or with any other source of income, or if they have a small pension or savings of more £16,000. Therefore, there will be a new group of people struggling, and they will not be old-age pensioners; they will be pre-old-age pensioners, as it were. They are people who have fallen out of work, but not been able to work to 66 and get their state pension. They have been left with little—in fact, in some cases nothing—from the safety net that we think the welfare state is there to provide.

There is a lot more that I could say; indeed, I am sorry that I have spoken for longer than I intended. Over the coming days I will go through Red Book in a lot more detail than I have managed to today. However, from what I have seen already, there is a great deal for people to be concerned about in what the Chancellor has announced today.

--- Later in debate ---

[Mr Jackson]

I fully understand and respect the hon. Gentleman’s constituency interests. Were I in his position, I would make the same points. Clearly, when we are in a less than benign financial situation, clearing up the abysmal mess left by the Labour Government, we have to make difficult value judgments. To govern is to choose, and sometimes the choices made will not please everyone. I understand and respect the hon. Gentleman’s views, and I am sure the Chancellor and the Treasury Front-Bench team have heard his views.

[Dame Anne Begg]

Will the hon. Gentleman give way?

--- Later in debate ---

[Mr Jones]

If the hon. Gentleman continues, I might go on for a bit longer, so he must be clever and not do so.

As my hon. Friend the Member for Aberdeen South (Dame Anne Begg) said, it has been billed that the Government have somehow saved the motorist by reducing tax by 1p, but the effects of paying for that will be disastrous for the oil industry in this country, including Scotland. They will be disastrous for the north-east, as it relies heavily on Teesside and Tyneside to supply the expanding gas and oil fields, which need long-term investment. It is completely and utterly irresponsible to throw a spanner into the works of the investment in developing some of the most difficult oil and gas fields in the North sea.

[Dame Anne Begg]

Does my hon. Friend agree that the danger of today’s proposals is that they might fatally undermine the whole North sea offshore sector, which is fragile anyway because the geology makes it difficult to get the oil out? As a result, the country may lose even more money, because the sector is a huge taxpayer. As my neighbouring MP, the hon. Member for West Aberdeenshire and Kincardine (Sir Robert Smith), said, 20% of all corporation tax is paid by the industry. What is being done today could put that in jeopardy.

[Mr Jones]

I agree, and there will also be a direct impact on jobs in oil exploration and in the booming oil supply business in Tyneside and Teesside. The short-term measure to try to get the Government out of a political fix on petrol prices will cause deep and long-term damage to jobs in the north-east and in my hon. Friend’s constituency.

The first-time buyer scheme, which the Red Book states will cost £250 million for just one year, will not help the north-east in any great way, because it will clearly be concentrated where a large number of houses are being built—the south-east and other areas. Because the Government have removed housing targets and affected social landlords’ ability to build new houses through the ham-fisted way in which they have structured the financing of social house building, I doubt whether there will be much effect on the north-east.

I also note that none of the £200 million additional investment in regional railways will go further than Leeds. Investment schemes for railways in the north-east—I have been calling for extra capacity for people to commute into Tyneside from Chester-le-Street and other places—will clearly not be forthcoming.

Finally, I wish to mention armed forces pay. The Chancellor said that there would be a £250 uplift for those in the armed forces earning less than £21,000. I remind the House that that is from the same Government who have frozen armed forces pay for the next two years. In addition, they have changed the calculation from RPI to CPI, which will cost many thousands of servicemen and women huge sums of money over the coming years. The Government should not be proud of that. I get rather annoyed because if the previous Government had done that, when I was a Defence Minister, the Conservatives and Liberal Democrats would have howled us down and called us a disgrace.

Is this a Budget for growth? No, it is not. Will it help the north-east of England? No, it will not. Under the confused regional policy that is proposed, which is supported by the right hon. Member for Berwick-upon-Tweed (Sir Alan Beith) and his Liberal Democrat colleagues in the north-east, we will find that as the country’s economy declines and contracts, regions such as ours will go from the very bad position that they are in now to an even worse one.