Income Tax

Annette Brooke Excerpts

Wednesday 28th November 2012 Commons Chamber

[Stephen Williams (Bristol West) (LD)]

I am glad to join others in saying how pleasant it was to listen to the new hon. Member for Cardiff South and Penarth (Stephen Doughty). I am well familiar with various parts of his constituency from family visits. It is nice to welcome another Welsh Stephen to the Chamber; I just wish our accents were as mellifluous as the hon. Member for Islwyn (Chris Evans).

We are discussing an Opposition motion, so let us examine the Labour party’s record when in office. In 1997, Tony Blair said that there would be no increase in the basic rate or the top rate of income tax while he was Prime Minister. As the Exchequer Secretary was saying, the Labour Government were in office for 13 years—for just over 4,700 days—and it was only in the last 35 days that the top rate of tax was increased to 50%. To put it another way, only one of the 156 pay slips that higher rate taxpayers would have received in that period would have shown an increase in their taxation. That suggests that the Labour party had no record of action and no philosophical appetite when it was in government and had the opportunity to do these things for higher taxes on high earners.

On tax relief for high earners Labour also had a lamentable record compared with its rhetoric today. It increased the relief for higher rate taxpayers to set against their pension contributions; people could put £215,000 into their pension fund and get higher rate tax relief in 2006, but that had been raised to £255,000 by 2010. The capital gains tax rate that Labour inherited in 1997 from the previous Government was 40%, but that was reduced steadily to 18% by the time Labour left office. On the lowest paid in society, the 10p rate of income tax was introduced in 1999, with the then Chancellor saying it was a measure to help the low-paid. I agree with that, but unfortunately he scrapped it in 2007, to loud cheers from his Labour colleagues—I well remember witnessing it from the Opposition Benches—because that tax rise for the lowest paid was financing tax cuts for those on higher earnings. Such is the record of the Labour party when it was in office.

[Annette Brooke (Mid Dorset and North Poole) (LD)]

Does my hon. Friend agree that it is really unusual that under a Labour Government in power for so long the rich became richer and the poor became poorer?

[Stephen Williams]

My hon. Friend says it is unusual, but I would say that it should not be surprising, given what Tony Blair said would be the intention of his party while it was in office. Of course, that gives us another opportunity to remind ourselves of Lord Mandelson’s comment that new Labour was

“intensely relaxed about people getting filthy rich”.

Let us compare the Labour Government’s record with what the coalition has done. Liberal Democrat priorities in the coalition are twofold: tax cuts for the lowest paid and effective taxes on the wealthy. We have seen the £10,000 tax-free threshold go from the front page of our manifesto and election leaflets through to the coalition agreement and it is on course for delivery within this Parliament. We will have raised the tax threshold from £6,475 steadily towards £10,000 possibly within four years and certainly within five. In the previous decade under the Labour Government, the tax threshold was raised by just £2,090. Under the coalition, more than 20 million people will have a tax cut of up to £700 and 3 million will have been raised out of income tax altogether. That disproportionately helps people who work part time, who are disproportionately women, and is particularly effective in helping the young. Indeed, a young person on the minimum wage can now work full time without paying any income tax. That is a huge difference from the position we inherited.

Unemployment (North-east)

Annette Brooke Excerpts

Wednesday 20th June 2012 Westminster Hall

[Several hon. Members]

rose—

[Annette Brooke (in the Chair)]

Order. At this stage, I shall not introduce a time limit, but I ask Members to be aware of the number of others who want to speak.

--- Later in debate ---

[Ian Swales]

I checked the figures with the Library this morning, and 7,000 more people were unemployed in 2010 than in 1997, despite the unprecedented amount of grants and unsustainable borrowing that were pumped into the area.

Big problems remain. Unemployment is way too high, especially in constituencies such as Redcar, and it remains my No. 1 priority. The hon. Member for Hartlepool said that the north-east was once the workshop of Britain. It can be again, and in fact already is to some extent—even today, it is the only region with a positive trade balance—but a lot more can be done. I agree with the hon. Gentleman that we need a clearer industrial policy. We also need consistency on renewables and public procurement. There are opportunities for further investment in infrastructure—I do not want to steal the thunder of my right hon. Friend the Member for Berwick-upon-Tweed, because I am sure that he is about to give an example.

I welcome the Government’s attention to the north-east. We have a regular troop of Ministers coming through, and it is good to hear that the Employment Minister will be meeting the Teesside business community on 10 July. I look forward to hearing the response from the Whip today.

[Annette Brooke (in the Chair]

The wind-ups will start at 3.40. I remind hon. Members that I have not put a time limit into operation, and it is entirely up to them whether that becomes necessary.

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[Grahame M. Morris]

Absolutely. That is a terrific point and there are many similar examples. In my constituency, Carillion was involved in infrastructure projects including Building Schools for the Future and hospital building programmes. I did not mention it earlier but that company has announced 130 redundancies.

There is no doubt that the north-east was hard hit by the global downturn of 2008, but the policies of this Government are entrenching a north-south divide. To quote a Nobel prize-winning economist, Paul Krugman:

“The urge to declare our unemployment problem ‘structural’—a supply-side problem of some kind, not solvable by the ‘simplistic Keynesian’ notion of just increasing demand—has been quite something to behold. It’s rapidly entering the category of a zombie idea, which just keeps shambling forward no matter how many times it has been killed.”

The problem is that demand has been depressed. We need to stimulate demand in the economy. Quite simply, communities and areas such as mine throughout the region cannot pull themselves out of the mire without Government support. Targeted support and intervention are what we need.

[Annette Brooke (in the Chair)]

Order. I propose a time limit on the remaining speeches, initially of five minutes. Each of the first two interventions accepted will stop the clock and give the hon. Member who gives way another minute; but clearly there will be reductions in the time limit if that happens. The Clerk will ring a bell when a Member has one minute left.

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[Phil Wilson (Sedgefield) (Lab)]

It is a pleasure to serve under your chairmanship, Mrs Brooke. I congratulate my hon. Friend the Member for Hartlepool (Mr Wright) on securing an important debate. I welcome the Liberal Democrat Members for north-east constituencies. It is a disgrace that the Conservative Members are not here to speak up for the north-east on the issue.

I want to be quick, and make some general points. In Sedgefield, unemployment has gone up by nearly 25% in the past 12 months. The number of people who have been out of work for six months or more has gone up 100% over the same period. There is something I would like the Government to do; I do not know whether the Whip is also the Whip at the Department for Transport, but areas such as County Durham and Darlington have a big issue with buses. People might wonder what that has to do with unemployment, but it is about getting to work. The cutting of subsidies from public bus services means that I have constituents who cannot get to work, and who must consider packing in their jobs. Secondly, Jobcentre Plus says it has funds set aside to buy bicycles for people, so that they can get to work. A bit of joined-up thinking is required between Departments.

The question of demand in the economy, to grow the private sector, has been touched on in the debate. The average wage in County Durham is £418, whereas the national average is £503. Cuts in benefits—and we know that welfare benefits are going to be reformed—will affect 120,000 households in County Durham. That is half the households in the county. About £150 million will be taken out of the local economy. That is something to bear in mind if we want the private sector to grow.

I want to refer to the same speech that the right hon. Member for Berwick-upon-Tweed (Sir Alan Beith) quoted, by John Mowbray. I congratulate John, as well, on being made an OBE in the honours list. In the same speech he went on to say that the public sector has been hit incredibly hard by the Government’s austerity purge. We must say that is true.

The way to get the private sector to grow is through the private and public sectors working together. I want to draw hon. Members’ attention to two initiatives in my constituency. One is the Hitachi factory, which will create 500 jobs, with thousands in the supply chain, the vast majority of which will be in the private sector, obviously. However, that would not have come about if it were not for public sector procurement.

The other initiative involves Durham Tees Valley airport. As Tees valley Members of Parliament will know, things have been difficult for the airport in recent years. The number of passengers using it has gone down from just under 1 million to about 200,000. Peel Airports has gone to the regional growth fund in the new round for a grant of some £60 million. It wants to invest over time some £60 million in developing the airport. It wants to develop the freight and logistics side of it, to the south of the airport. That requires the input of some £60 million of taxpayers’ money. That is the public and private sectors working together.

I want to quote from the assessment that Durham Tees Valley airport has pulled together of the impact that the development could have. The impact assessment states:

“Once fully developed and occupied, alongside the current operation of the airport, the whole DTVA site has the potential to support around 3,650 gross FTE jobs, supporting approximately £220m of gross direct GVA for Tees Valley each year…2,420 of these are net FTE jobs and these could be taken by Tees Valley residents.”

That is very good news for the Tees valley. All MPs in the north-east should get together to ensure that the project works.

The final thing that I want to mention is regional pay. As I said, the average wage in County Durham is £418. I ask the Whip this: how low does he think that pay should be in County Durham? I keep asking that question, but I never get an answer. Regional pay will suppress the economy in areas such as the north-east of England. The hon. Member for Redcar (Ian Swales) and I agree on regional pay; we have both signed early-day motion 55.

[Annette Brooke (in the Chair)]

Order. I call Mr Kevan Jones, with a time limit of four minutes.

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[Stephen Crabb]

The hon. Gentleman seemed to downplay a 29% increase in engineering apprenticeships. More than a third more apprenticeships in engineering have been created, which is quite a success story, and I am grateful to him for highlighting it this afternoon.

We have heard useful contributions from my hon. Friend the Member for Redcar (Ian Swales) who recognised the importance of a sensible regional strategy. He talked about the benefits of the local enterprise partnerships in the north-east and in the Tees valley. He also drew attention to the fact that the north-east has recently achieved record exports. We believe in rebalancing the economy, and we want to see a more balanced export-led recovery. With its record exports, the north-east is well placed to take advantage of that.

Several hon. Members have referred to the excellent John Mowbray, who is the president of the north-east chamber of commerce. Last week, he talked about the importance of the north-east as a potential driver for an export-led recovery. I am really disappointed that Labour Members have not recognised that and are not sharing the ambitious approach of the north-east chambers of commerce. John Mowbray said that what the north-east really needs is a united front. Labour Members have turned up in force this afternoon not to show an ambitious united front or a positive approach—[Interruption.]

[Annette Brooke (in the Chair)]

Order. May I suggest that Members make a formal intervention, rather than engaging in this rather poor behaviour?

[Stephen Crabb]

Let me reiterate that the coalition Government have two parties working together to fix the legacy of a broken economy left to us by the Labour party. We are doing it in a way that fully recognises the importance of protecting regions such as the north-east of England, of seeing them reach their potential and of seeing unemployment brought down as quickly as possible.

Oral Answers to Questions

Annette Brooke Excerpts

Tuesday 24th January 2012 Commons Chamber

[Mr Hoban]

I do not want to comment on particular decisions. I am well aware of the concerns that people in the hon. Gentleman’s constituency have about the prospect of Peacocks closing. It is vital that banks are in a position to lend to viable businesses. That is why we entered into Project Merlin, which has led to an increase in bank lending compared with last year. That is the right thing to do, and I would encourage the management of Peacocks to engage with the banks and other investors to get the right outcome for them and for their business.

[Annette Brooke (Mid Dorset and North Poole) (LD)]

9. What steps he plans to take to ensure that the burden of taxation is fairly distributed.

[The Chief Secretary to the Treasury (Danny Alexander)]

We are significantly shifting the burden of taxation away from people on lower incomes and on to those with broader shoulders. The bank levy, the increase in capital gains tax, changes to pensions tax relief and the maintenance of the 50p rate all help to enable us to meet our commitment to increase the income tax personal allowance to £10,000, cutting taxes for millions of hard-pressed, hard-working families.

[Annette Brooke]

I thank my right hon. Friend for that answer. However, the Institute for Fiscal Studies said of the autumn statement:

“New tax and benefit measures are, on average, a takeaway from lower-income families with children, and giveaway to middle and top of income distribution”.

What further approaches will he take in the forthcoming Budget to ensure that we are all in it together, be it a demonstrable crackdown on tax avoidance, perhaps a mansion tax, and certainly more progressive tax measures?

[Danny Alexander]

Of course, the burden of the deficit reduction is fair overall, and we know that the burden falls most highly on the richest 20% of the population. However, with spending cuts needing to continue for longer—another two years—we need to redouble our efforts, both to tackle tax avoidance and to deliver the income tax cuts that we have promised, by lifting the personal allowance as rapidly as the nation can afford. Those are, of course, issues that we shall be considering in the run-up to the Budget.

European Union Fiscal Union

Annette Brooke Excerpts

Wednesday 14th September 2011 Westminster Hall

[Several hon. Members]

rose—

[Annette Brooke (in the Chair)]

Order. Before we proceed, I should point out that I will call the Front-Bench spokesmen to begin the winding-up speeches at 3.40 pm. Quite a few Members are standing, so whether everyone gets in is in your hands, gentlemen.

--- Later in debate ---

[Kelvin Hopkins]

With the far right we need to look at each individual case; I think that in Norway it was just one lunatic—an obsessive. Of course the far right attracts people who I would suggest are not entirely sane. Nevertheless, the far right in general has not taken hold in post-war Europe because we have had meaningful democracies; but I think those meaningful democracies are starting to fade. Fiscal union would, again, mean democracy taking more of a back seat.

It is clear that the founding fathers and mothers of the European Union in the 1950s wanted a world in which electors did not have the power to change Governments; they wanted power safely in the hands of a stable body. That is why the Commission was set up—to make sure that we do not have distasteful changes of politics and Government. However, changes of Government mean that people believe in democracy and work for it. They know that they will have a chance of getting their party into power next time. I shall certainly work hard next time to make sure that our party comes back into power; and no doubt our Conservative and Liberal Democrat colleagues will do the same. That is why democracy means something: we know it matters because those elected have power, and because it is possible to change the Government. That cannot be done with the European Union.

We are in a European crisis. The hon. Member for Stone constantly refers to Europe, but I refer to the European Union. The European Union is not Europe: they are two concepts. Europe is a wonderful continent full of fabulous people and great culture, history, music, art, languages, and literature; but the European Union is a political construct imposed on some of the countries of Europe. I fully support the idea of a different kind of European Union—a loose association of democratic member states co-operating for mutual benefit. I do not support a bureaucratic and anti-democratic machine that controls our lives and makes our votes decreasingly meaningful at national level.

The polity over which a Government govern must also be meaningful. If national boundaries are dissolved, and other structures are imposed—especially if those are not democratically controlled—that is not democracy. The great thing about democracy is that it is accepted these days that it will govern a national state. I am an internationalist, but I think that internationalism is about good relations between states, not the abolition of states, national boundaries or national entities. We get on extremely well with other states around the world because we co-operate across national boundaries, but we do not want them to disappear completely. We have culture, language and history that unite us in particular polities. That is why Germany, for example, could unite its east and west and spend a vast amount of money rebuilding East Germany. It was accepted that it was part of Germany. I doubt whether it would have spent so much money rebuilding, say, Greece—because Greece is not part of Germany but a separate country.

I think that many people would be upset if the same kind of money that went into rebuilding East Germany went into helping Greece. Greece now has the opportunity to get out of the euro, recreate the drachma and devalue. Suddenly, Greece would become the cheapest place in Europe for people to holiday, and the tourist industry would take off like nobody’s business. Greece would recover, because that is what it will be good at. It is a beautiful place, where people go on holiday. That is the logic for Greece.

The problem, of course, is that banks—and particularly French banks—have lent vast sums of money to Greece, and will be in trouble if that happens. However, as was said in a good discussion on “Newsnight” last night, either the euro will collapse and there will be a crisis with many people losing their money, or we will deconstruct the euro in a progressive and managed way, and some banks will have problems. Then Governments will have to step in and no doubt recapitalise those banks, if they choose to keep them alive. That is a difficult choice, but the logic is for countries that cannot sustain membership of the eurozone to get out, recreate their own currencies and devalue.

Ireland’s major economic partner is Britain. The British isles is not a single economy, but we are close. The fact that we are not in the euro and have depreciated our currency substantially means that the poor Irish, who are stuck in the euro, are massively over-valued relative to Britain, and so have a trading problem with Britain. I have suggested to Irish friends that they should recreate the punt, depreciate and rejoin the sterling zone, which is where they belong, instead of remaining in the eurozone, where they do not. I have not had any positive answer to that suggestion, but that is the logic of where we should be going.

I could speak for much longer, but others want to speak and I have probably said enough for the time being. I support the hon. Member for Stone in arguing the strong case against fiscal union.

[Annette Brooke (in the Chair)]

After the next speech, by the hon. Member for Northampton South (Mr Binley), I would like to call the hon. Member for Witham (Priti Patel), and I know that there are others who want to speak. The winding-up speeches will begin at 3.40pm.

Amendment of the Law

Annette Brooke Excerpts

Monday 28th March 2011 Commons Chamber

[Caroline Flint]

I have already given way to the hon. Gentleman, so I am going to make some progress.

I turn to some of the measures announced in the Government’s plan for growth. I think we would all agree that the planning system shapes the places where people live and gives character to our communities. It helps us to protect our natural and historic environment, and it should ensure that everyone has access to green space and unspoiled countryside. It is crucial for growth, because it supports economic development, helps to create jobs and contributes to our prosperity as a nation. I have never shied away from the fact that we as a country need to build more homes, and that our planning system has to support that. When the Government were elected, they promised bold, radical reform of the planning system that would speed it up, reduce bureaucracy and support growth. Let us look at what has happened.

Following the Government’s chaotic and botched reforms to the planning system, there has been a dramatic fall in the number of planning permissions for new homes, which are now at a near-record low. The figure for the third quarter of 2010 was the second lowest seen in the past 19 quarters, and in the last quarter of 2010, new planning permissions were down 22% on the previous year. It is no good the Government blaming the previous one, because things have got worse and not better since they came to power. The biggest drop of all came just after the last general election. In the first quarter of 2010, before the election, more than 40,000 planning permissions were granted to developers for new homes, but by the third quarter, after the election, that had fallen to just 30,000.

The Chancellor sought to address that last week, but I am afraid that in doing so, he sounded the death knell of localism. I offer my condolences to the Communities and Local Government Secretary for the demise of localism, because after months of the Government pledging power to the people—neighbourhood plans, communities in the driving seat and so on—the Chancellor blew localism out of the water in a single sentence. He said that

“from today, we will expect all bodies involved in planning…to prioritise growth and jobs, and we will introduce a new presumption in favour of sustainable development, so that the default answer to development is yes.”—[Official Report, 23 March 2011; Vol. 525, c. 956.]

I cannot recall cheers from Government Members when that was said. While the Secretary of State trumpets devolving power to local people and promises to give them a real say in the development of their area, the Chancellor wants to make it easier for developers to bypass the planning system altogether. They cannot both be right, which reinforces the confusion that has paralysed the planning system in the past 10 months.

[Annette Brooke (Mid Dorset and North Poole) (LD)]

Did the right hon. Lady support regional spatial strategies, which imposed on my constituents a brand-new town on green belt that was not supported by any democratically elected person? Does she prefer that to the Government policy that she describes?

[Caroline Flint]

I am afraid that if the Chancellor gets his way, nobody will be consulted.

No community can thrive if the system is biased against change. Every community must look to create new homes, workplaces and jobs. A planning system that is devoid of obligations to provide for the future and that just protects the present is destined to fail, but a fair and open planning system that involves local people, and that leads to better decision making and greater consensus on development, is important. Although the Government promise to give local people more of a say, their policies do exactly the opposite. Ten months in, their record on planning is one of incompetence and broken promises. Government Members who represent our green and pleasant land must be in mourning, for although existing controls on green belt will be retained, the Chancellor made it very clear that the Government

“will remove the nationally imposed targets on the use of previously developed land.”—[Official Report, 23 March 2011; Vol. 525, c. 956.]

Forgive me for putting that in plain English. More developers will be given a yes, but as there will be no obligation to develop brownfield sites, by definition, more greenfields will be developed. I do not hear any cheers from Government Members for that one.

We can add to the chaos in the planning system the fact that plans for more than 200,000 new homes have been dropped. Under Labour, more than 2 million more homes were built in England, including 500,000 affordable homes; 1.5 million social homes were brought up to a decent standard; 700,000 new kitchens, 525,000 new bathrooms and more than 1 million new central heating systems were installed; 1 million more families were able to buy their own homes; help was provided to more than 130,000 first-time buyers through shared-ownership schemes or equity loans; and even in the teeth of the recession, the previous Government were building 55,000 new affordable homes, which is more than this Government will build in any of the next four years.

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[Annette Brooke (Mid Dorset and North Poole) (LD)]

I draw the House’s attention to my entry in the Register of Members’ Financial Interests.

I start by welcoming the increase in income tax thresholds. It is important that 1.1 million people, including a number of part-time workers, are being taken out of tax altogether. That will make a great deal of difference to them. In addition, up to 25 million people are likely to receive a rebate, which will, of course, be some help in these difficult circumstances. I would also like to welcome the many measures to help small and medium-sized enterprises, through incentives to invest and innovate, reduction in taxation and, most importantly, cuts in regulations that have been such a burden on our small and medium-sized firms.

We are where we are, and there is no doubt that it is growth in the private sector that is going to take us out of this situation. We are already seeing growth in manufacturing and growth in exports. That has to be where the growth comes from, rather than in the public sector. In his Budget speech, the Chancellor identified our current planning system as a chronic obstacle to economic growth in Britain. I would like to make a few comments on some of the proposals for planning.

First, on making it easier to convert commercial premises to residential ones, I am pleased this is going out to consultation as I can see some instances where it would be beneficial and others where it would be detrimental. The overriding question for me is how this fits in with localism, local decision making and indeed the proposed neighbourhood plans.

Developing an office block left empty for many years owing to a lack of demand for such facilities because of new ways of working sounds like a good idea, but let us suppose that that office block overlooks Poole harbour. It could be right for a second home, so what conditions could be placed on it to make sure local that housing needs were met and that there was an affordable component? My own district shopping centre has suffered from estate agent creep, takeaway café creep and, of course, charity shops, so I hope its viability will be secured through a neighbourhood plan, but will this proposal present another threat? I welcome residential accommodation above shops, but there is often a conflict with noise and other side-effects from the retail use, which would need to be considered.

Although more flexibility about the level of control over change of use is generally to be welcomed, I am wary about any top-down national measures that would impede local people from shaping their local or town centres. Councils and local residents need to decide when and where the relaxing of rules would be advantageous. The new presumption is in favour of sustainable development so that the default answer is yes. Again, my worry is how this will fit with localism and the proposed neighbourhood plans. What is sustainable development? Presumably, it will be defined in the national policy framework. Housing amidst shops is sustainable in one sense, but not in others—the viability of a local shopping centre, for example.

Having fought long and hard against centralised targets, the south-west regional spatial strategy and the last Government’s plans that would have destroyed valuable green belt within my constituency and that were not supported by any locally elected person, I welcome the commitment to protect the green belt. Naturally, I welcome the removal of nationally imposed targets, but with this presumption, can valuable green spaces, which are not green belt, be protected within a neighbourhood plan? It is particularly important in an urban setting to protect those green lungs and to be mindful of densities. High density works in some settings, but not in others. Will this new presumption be a trump card over local plans?

The infrastructure must be there. We need the right balance with housing. My local council seems to be pursuing its core strategy and trying to put the plan in place, but is still working to the housing targets set by the last Government.

I shall comment briefly on something that affects housing in my constituency. I represent an area with a great deal of valuable heath land, of which I am very proud. Natural England, however, has a policy that no development can take place within 400 metres of the valuable heath land. That is right for a large development, but when it comes down to infilling in an already built-up area, sometimes with dual carriageway between the housing and the heath land, I feel that it is too restrictive and should be looked at again. I do not want to jeopardise our valuable heath land, but I am sure that this policy, as it stands at the moment, is too restrictive.

It is important to achieve growth. There has to be some scope for speeding up the planning process, for empowering our councils to prioritise employment and housing opportunities and for giving them the tools to do so. That seems to me to make sense because we should have local decision making—on how we work, how we live and how we play.

Independent Financial Advisers (Regulation)

Annette Brooke Excerpts

Monday 29th November 2010 Commons Chamber

[Tessa Munt]

I want to be brief.

We should consider what an IFA’s clients are seeking to buy when they look at financial products, look at what they do not like about the present procedures and consider whether the RDR will change anything. A constituent of mine has stated that when his clients buy their financial service products, they are seeking a similar experience to that when they buy other goods. First, they want the buying process to be a simple and pleasant experience. If the Government wish the public to buy more financial products and take responsibility for their future, they should not forget that fundamental point. That is not easy to achieve in the current environment. For a start, most clients do not like to be issued with mountains of complex paperwork. They find it quite intimidating.

Secondly, a lot of people visit an IFA with a specific purpose in mind—to invest some spare funds, to discuss their pension, and so on. They wish to restrict the conversation to those points that they believe are relevant and, having listened to what the IFA has to say about the matter, will wish to make up their own minds about whether the product under discussion is suitable for their needs. However, once in discussions, people often have to go through the IFA’s “advice process”, and are no longer responsible for their own decisions. The IFA has to be sure that the product is right for them, so these people find themselves undergoing a time-consuming and irritating process, having to answer personal questions that they often consider an invasion of their privacy.

Thirdly, clients quite rightly seek value for money. Unfortunately, the whole regulatory procedure is so cumbersome that it is no longer cost-effective for those with limited funds to seek an IFA’s advice. The cost of many financial products has risen dramatically. For example, 30 years ago the annual management charge on a unit trust was usually 0.25% or sometimes 0.375% per annum, but now it is usually 1.5% per annum. Much of the increase has arisen purely as a result of regulatory costs. A significant part of the cost increase is driven by regulation, so everyone suffers.

Will the RDR change any of the above? Not in my opinion: there is little evidence that any of those fundamental issues will change as a result of the RDR. We are all in favour of raising standards, but further examination passes will not address any of those issues.

[Annette Brooke (Mid Dorset and North Poole) (LD)]

Does my hon. Friend agree that it is quite surprising that even where IFAs are well on their way to getting the new qualifications, they are still against the system and see the exams as pointless? The new qualifications will not weed anybody out, which might have been their objective, because everybody sees them as inappropriate for the job that these people do.

[Tessa Munt]

Absolutely, and I thank my hon. Friend for her intervention.

The cost of paying for the IFA’s time will not change. We are all in favour of raising standards, but further examination passes will not address any of the issues that I have set out, and clients will not mind whether they pay commission or fees. To improve matters, the regulator must lessen the threat of litigation by giving clients the freedom, if they so wish, to take an element of personal responsibility in their decisions and to buy from an IFA after those discussions. The regulator must also stop telling IFAs how to structure their business models and must allow them be innovative. Without the mountains of regulation, most experienced IFAs could significantly improve the service that they offer their clients while dramatically reducing their charges. Also, they could probably employ more people and could significantly improve the customer’s experience.

I would like to quote from two small independent financial advisers in rural Somerset. One says:

“If the RDR goes through in the current format I am likely to lose the adviser…I employ. He is highly intelligent (a university graduate) and has over 20 years relevant experience. He is very competent to undertake the work that he does. However, he is in his…fifties and is busy with two children still at home and another at university. At this stage of his life he simply does not wish to use all of his spare time studying for further examinations. So this will be another person in your constituency without a job—so unnecessary.”

The second person said:

“I am lucky, I have all the necessary exams. I just hope they do not raise the bar again. I really could not face the pressure of having to pass more exams at my age. If it happened, I would have to close and more people would lose their jobs.”

The FSA in this case is judge, jury and executioner. I ask the Ministers to reconsider the rules for 2013, and to reopen talks with the FSA, to make it possible for independent financial advisers to offer the high-quality service that they want to give to their customers.

Vulnerable People (CSR)

Annette Brooke Excerpts

Tuesday 9th November 2010 Westminster Hall

[Andrew George (St Ives) (LD)]

It is a great pleasure to speak under your chairmanship, Mr Crausby. I am particularly pleased to have secured an opportunity to debate the effects of the comprehensive spending review on vulnerable people.

Some of the issues that I raise may well be raised in the more specific debate on housing benefit in the main Chamber this afternoon. For the purpose of this debate, I want to define the terms to which I have referred. The debate is, in effect, about the impact on vulnerable people of not just the CSR, but the Budget and the various departmental announcements that have been made and which underpin the context in which the CSR was announced on 20 October.

By “vulnerable people”, I mean not just those in need of specific state support who are unable, through a learning disability or other forms of disability, to manage alone, but those who may become vulnerable or find themselves in significant need, housing stress, homelessness, hardship or debt. The effects to which I refer cover a wide range of policy areas. Of course, I do not intend to cover all areas of government, although vulnerable people are likely to be affected by a wide range of policies, but I am keen to cover access to housing and housing benefit; welfare, including the support and benefits for unemployed and disabled people; care for adults and children; and public transport and access to it.

By way of background, it is worth noting that no self-respecting political party would have undertaken, in the lead-up to the last general election, the kind of measures that have been proposed since, because of how our political system works. However, we all knew as we went into the general election that Britain had the largest deficit in peacetime history, the largest structural deficit in Europe, that £120 million a day was needed to service the interest on that debt and that £1 in every £4 that the Government spent was borrowed money. We entirely understand the need to put right the public finances, which is the background to this debate and the CSR.

I would like to acknowledge a number of achievements. From the Liberal Democrat Benches, it is worth acknowledging that, despite the rather austere circumstances, we have secured outcomes from coalition agreements of which I believe the coalition can be proud. I am referring to the policies of taking the lowest earners out of tax altogether, which I know will be ratcheted up over the coming years until the figure is £10,000 before tax applies; restoring the earnings link for pensioners and a guarantee of uprating with a triple lock; the pupil premium and the early years premium, particularly for vulnerable children; the pay protection for low-paid public sector workers; capital gains tax for top earners; and the banking levy to help to pay for many of these measures. I was also pleased to hear of the Treasury’s intention to make a concerted effort to tackle tax evasion and fraud, which is essential to ensure that we get the balance right in where the finances are found.

Also by way of background, it is worth acknowledging that the Chancellor of the Exchequer repeated a theme throughout the CSR statement on 20 October—one that I entirely applaud. For example, he said at column 951 that

“those with the broadest shoulders will bear the greatest burden”.

Equally, he said at column 956:

“A civilised country… protects the most vulnerable”.—[Official Report, 20 October 2010; Vol. 516, c. 951-56.]

Protecting vulnerable people was a theme repeated throughout the statement, and I loudly applaud both those objectives.

The purpose of this debate is to ask whether that laudable and agreeable objective is achieved by the combined efforts of Government policy. If not, will the Government review their policies and make the necessary adjustments to ensure that those with the broadest shoulders do bear the greatest burden and that the vulnerable genuinely are protected? I doubt that, in the tribal warfare that often masquerades as debate in the House, we will do anything other than divide on pre-determined lines on the assessment behind those questions, but we can call on other commentators to contribute to the debate.

As we know, the Institute for Fiscal Studies disagreed with the Treasury’s claim. I am pleased to see the Minister in her place and I look forward to her response to the debate. I am sure that she will respond to the IFS assessment of the combined impacts of the CSR and the Budget. The IFS disagreed that the overall package of tax and benefit changes was progressive. Carl Emmerson, acting director of the IFS, said that

“our analysis continues to show that, with the notable exception of the richest 2%, the tax and benefit components of the fiscal consolidation are, overall, being implemented in a regressive way.”

The IFS emphasised the problems involved in estimating the distributional effect of changes in public services. It welcomed the Treasury’s attempts to model those, but noted its finding that the public service spending cuts announced in the spending review were regressive.

Equally, the Financial Times described the spending review as

“a gamble given the continuing weakness of the recovery”,

but supported the decision to cut spending, provided that growth in the economy returns. The Times said that, broadly speaking, the priorities chosen by the Chancellor were correct but that the changes could be “very painful” for the poor. The Guardian also commented that the spending review was “a major gamble”—I shall return to that concept—at a time when economic conditions have deteriorated. It said that, furthermore, the cuts would be focused on the sick, the poor and working parents. The IFS commented that the cuts in overall public spending over the spending review period would be the deepest in real terms since the second world war and that cuts in spending on services would be the largest since the four years beginning in 1975.

As I said, housing benefit measures will be debated this afternoon in the main Chamber. Two primary changes are being made next year. The first is the capping of local housing allowance for each property, which will be implemented in April 2011. That has been a primary focus of political debate and comment in the House and elsewhere, although it will impinge on a relatively small number of properties and households. For example, just 139, all in London, receive in excess of £50,000 per annum; 11,233 are in receipt of more than £20,000 per annum, some 10,000 of which are in the London area. In Cornwall, which, as hon. Members might expect, I will discuss in a moment, 40 households are in that category. The measure would save £65 million.

What concerns me most particularly is the impact on rural areas such as Cornwall—but not just Cornwall. A focus of my comments will be the reduction in the percentile market rates used to calculate local housing allowance rates from the 50th percentile—the median—to the 30th percentile of local rents, which will be implemented in October next year. The Department for Work and Pensions estimates that that will secure annual savings of £425 million.

The nature of the debate in the media gives the impression that housing benefit is paid mainly to people who are unemployed. Because of the “tabloidisation” of the debate, the implication is that the work-shy are in receipt of housing benefit and need to be encouraged by stick rather than carrot to find work. In fact, only one housing benefit claimant in eight is unemployed. I should add that, in future, the effect of the uprating of housing benefit according to the consumer prices index rather than local rents will place further significant downward pressure on housing benefit and may well result in shortfalls between rent and the housing allowance that people are given.

The Secretary of State has made it clear that the intention of the Department is to use housing benefit to force rents down, and I can understand the logic behind that, which is that housing benefit, because of the sheer volume of those who receive it, has an inflationary impact on the rental market, particularly the private rented market. However, not all areas will necessarily respond uniformly. The changes may well work in some rental market areas, but I am not convinced that they will work in them all.

For example, according to figures published in The Guardian on 30 October, outside London, Cornwall will be the hardest hit by the changes. Indeed, 11,180 households —one third of all households with employed people in receipt of the benefit—will be affected. There will be a significant shortfall between their housing benefit and the rent that they will pay.

In Cornwall, there is a significant shortfall right now between the median rent as assessed previously by the rent office—now by the Valuation Office Agency—and what housing benefit should be in Cornwall, and therefore between the housing allowance that will be available to tenants and what is available in the market on a week-by-week basis. It is very rare indeed that a new property comes on to the market that is actually within—either on or below—the median rent as assessed by the valuation office. Most rents fall above it, and therefore the shortfall has to be made up by the tenant, who may be on a low income or on benefits.

In Cornwall, 57,109 people claim housing benefit; 12,972 are of working age but not working—they include those in receipt of income support or jobseeker’s allowance—and about 12,000 are of working age and are working, or are on a non-passported benefit or employment support allowance, previously incapacity benefit, or contribution-based jobseeker’s allowance. A similar picture is painted by one of the larger social landlords. Penwith Housing Association tells me that about 60% of its tenants are on housing benefit. More than half of those who are of working age are indeed working, and are in receipt of either partial or full housing benefit support to cover their rent.

Yesterday, Cornwall council published some information on the likely impacts on the local community of the various changes to housing benefit. Its assessment is that the reduction of the market rental from the 50th percentile—the median—to the 30th percentile is likely to have the biggest impact. It says that 10,500 households are experiencing a shortfall between housing benefit and the rental, and it is unknown what the likely impact will be on them.

The council has not yet made a calculation, but it believes that a larger number of households will experience a significant shortfall between the rent and the housing benefit available. It anticipates that tenants who will ultimately be evicted because they can no longer meet their rent payments as a result of the shortfall will be found to be intentionally homeless, according to statutory interpretations, and therefore not eligible for assistance from the local authority. There will be an increase in demand for social housing in some areas, and the impacts on local people will be significant indeed.

We are very lucky in Cornwall to have the Cornwall Residential Landlords Association, which is a responsible and well-organised band of private landlords who, collectively and individually, provide an excellent service to the local population. They look for clear signals from the Government. I believe that the Government are looking at increasing the availability of direct payments to landlords in certain circumstances. Where that is done, preferably on a voluntary basis with the agreement of the tenant, it may help to lever rents down because the landlord will have a cushion of reassurance that the payments will come to them. However, the pressures and difficulties that will be experienced between landlords and tenants will intensify as a result of the cuts.

The problem in a market such as Cornwall’s—this applies to many other areas where there is also a vibrant tourism economy—is that landlords have alternatives that, frankly, on many occasions, will give them a far better income and greater certainty that they can recover the property. Many take up those alternatives. Many landlords will leave the marketplace and go for the much easier option of gleaning their income from the tourism sector.

The situation in Cornwall is not quite like the urban or suburban situation that I believe the Government have envisaged, whereby the alteration in the housing benefit arrangements and assessments will result in a levering down—a crow-barring—of the rentals in the private rented sector. It is not anticipated that that will happen in a place such as Cornwall, so I hope that the Government will look overall at this measure and consider that having a roof over one’s head is absolutely vital for many families. We are talking about working families who are simply seeking security in life from which to get to work, school their children and establish some kind of family security. This is about penalising people not because they are unwilling to work but simply because they are poorly paid, and I am sure the Government have no intention of doing that. I think they would like to ensure that work does pay.

Looking at the situation in Cornwall, which is, I understand, the same as in North Norfolk and other such rural settings, most analysts consider that there will be few new properties coming on to the market in the 30th percentile or below. Opportunities will be restricted, landlords will be given other options, and there will be instability, overcrowding and a possible cutting of corners, with families having to move and working families under greater stress. The problem with the proposal in the housing benefit reforms to extend the single room rent to people under the age of 35 is that there is little of that type of accommodation available in many rural areas, and planning policies seek to restrict what is often referred to as “bedsit land” in some smaller towns. On the one hand we have the Government, through their planning policies, giving local authorities the right to restrict the extent to which parts of small market towns are, as they see it, ghettoised by these bedsit arrangements, and on the other hand they have a policy that seeks to encourage that, through the housing benefit system.

[Annette Brooke (Mid Dorset and North Poole) (LD)]

Does my hon. Friend share my concern that when there has been a partnership break-up, the option of only a single room allowance up to the age of 35 might prevent good quality contact with children?

[Andrew George]

My hon. Friend makes a very good point about one of the great difficulties that occur when there is family break-up. I fear that as a result of these kinds of measures we might get more family break-ups, because of the stress and pressure under which families might be placed. In our constituency surgeries, we all see families in that very sad situation. We see single parents “without care”, as they are sometimes rather unfairly described, who find themselves wanting to have contact with their child or children but being unable to do so because of their very constrained circumstances. This policy will only make that situation worse.

--- Later in debate ---

[Chris Leslie (Nottingham East) (Lab/Co-op)]

As ever, Mr Crausby, it is a pleasure to take part in a debate with you in the Chair.

I congratulate the hon. Member for St Ives (Andrew George) on raising this important strand of an exceptionally complex set of announcements, which have come thick and fast from the Government and are only now beginning to reveal themselves to MPs, never mind to the wider public, as the implications begin to hit home. A lot of implications will not hit home until the next financial year and then into the next few years of this Parliament, at which point I would expect growing discontent and increased shock and surprise at how harsh the Government chose to be on the most vulnerable in society through their spending policies.

The hon. Member for St Ives is being exceptionally honourable in this matter, and he genuinely feels strongly about trying to speak up on behalf of vulnerable people, but when he says that certain consequences of the Government measures are “perhaps unintentional”, I suspect that he is being more than generous. Part and parcel of the political strategy that goes alongside the Government’s supposed economic approach is ensuring that the welfare changes and reductions in expenditure hit the poorest in society who, on balance, tend not to vote for the Conservative party.

The hon. Gentleman will have greater insight than me into the Liberal Democrats’ approach, although I suspect that even he might not know what is going on with those at senior levels, as they assimilate ever more closely with the leadership of the Conservative party. I still regret the choice that his colleagues made to prop up and provide the scaffolding for this harshly strategic and deliberate set of decisions. Those in the Conservative party have been planning such decisions for many years, and attempts to scale back the role of public investment in our economy have been part and parcel of their approach throughout. They are now able to unwind that approach with a certain degree of alacrity under the guise of deficit reduction.

[Annette Brooke]

I hesitate to interrupt the hon. Gentleman’s flow, but does he agree that much-needed welfare reform should be tackled? There might be questions about how to tackle it, but does he agree with the general principle?

[Chris Leslie]

Nobody disagrees that we need a level of welfare reform, but the question of how we do that is at the centre of the debate. We could shut down the Department for Work and Pensions tomorrow and not spend an extra penny. That would be a degree of welfare reform, but it would be so ridiculous that it would be off this planet. We could have a level of reform that was too slow and did not really bite. I believe that the trajectory of reforms pursued by the previous Administration sought to strike a fair balance.

The extent to which Ministers are reducing what is known as “annually managed expenditure” within the welfare budget has been designed around a political strategy. By taking that amount from the welfare budget, the Chancellor tried to come within spitting distance, as he saw it, of Labour’s plans for deficit reduction within the departmental expenditure limits. That political strategy rapidly fell apart, particularly because the Opposition accepted the need for a certain level of welfare change.

Let us look at the points raised by the hon. Member for St Ives. If the welfare changes are not handled sensitively and their implementation is blind to the human costs involved, some of them will affect the real lives of real people. Such people will be increasingly frightened and unable to cope with some of the changes, and that will create great harm. That harm might not have the quantifiable economic or econometric measurements that we traditionally look at when monitoring fiscal and monitory policy, but it is real and will have an indirect effect on our economy.

--- Later in debate ---

[Justine Greening]

It is important to say that the change relates to new tenants rather than existing ones. Existing tenancies will not be affected by such measures. On the question of market rates and affordability, we will want to see landlords, the Homes and Communities Agency, and the regulator, in conjunction with local authorities, talking about ensuring affordability. The hon. Gentleman is right to point out that housing benefit will still be available to support people.

The challenge is to move to a more sustainable footing for housing, and particularly for social housing. That is most important for housing associations, and the need for them to keep reinvesting. We have tried to strike a balance that is broadly fair to those on existing tenancies and to ensure that the new stock that we seek to create—the £4.5 billion will create about 150,000 affordable homes—is used more effectively to support people. At the same time, we want to work with people to ensure that rents are affordable. Nevertheless, housing benefit will still be there.

The hon. Gentleman also spoke about the cap on the housing allowance and setting the local allowance at the 30th percentile rate. The reality is that people who are working must ensure that they can afford where they live. It will be difficult to ask them to pay into a system in which people on out-of-work benefits are living in areas that they simply cannot afford. The 30th percentile change is about trying to strike the right balance between what is affordable and what is fair and reasonable.

[Annette Brooke]

I thank the Economic Secretary for her earlier comments, which were helpful in setting the scene for reform. However, I share the concern of my hon. Friend the Member for St Ives (Andrew George) about the fact that housing benefit will impact differently in different areas. For instance, in my area I obviously have winter lets, and people seem to be concerned about the smaller one-bedroom or two-bedroom properties. I know that the transitional fund has been allocated, but will the Economic Secretary explain how the problems of each individual area, as they relate to vulnerable people, will be dealt with sensitively?

[Justine Greening]

The hon. Lady is right: different parts of the country clearly have different housing needs and challenges. The Department for Work and Pensions will be working with local authorities through the transition period, and as she pointed out, we need funding in place for that as well. There will be £140 million of discretionary funding to support local authorities, £10 million of which is for London. It is worth pointing out that that is not the only support available for those affected.

For example, we still have many things such as the social fund, which includes budgeting loans, crisis loans and community care grants that are being maintained. We are considering how the social fund can be more localised, so we are working with the Department for Communities and Local Government and local authorities to see how we can best use the money we have to support people, in a way that works for them and at the local level. Interestingly, no London MPs are here, apart from me. Depending on where one represents in the country, there is a different group of constituents, facing a different series of challenges. Therefore, ensuring that the local aspect is fully part of how we work through the transition is vital. That is why the role of the Department for Work and Pensions, working with local authorities and the DCLG, is so critical. That is also why, as Liberal Democrats will recognise, localism is a theme that needs to run more broadly through our policy across Government. That is one reason why in this area it is important.

Oral Answers to Questions

Annette Brooke Excerpts

Tuesday 13th July 2010 Commons Chamber

[Mr Hoban]

I have not been promoted, Mr Speaker.

The changes to capital gains tax that we have introduced will ensure that the right tax regime is in place and that it is fair and responsible. The hon. Gentleman ought to remember, of course, that the capital gains tax rate for second homes prior to the Budget was 24%. It has now gone up to 28% for those paying higher rate taxes, but those on basic rate taxes will be paying only 18%.

[Annette Brooke (Mid Dorset and North Poole) (LD)]

5. What recent representations he has received on the proposals in the June 2010 Budget intended to increase economic growth; and if he will make a statement.

[The Chief Secretary to the Treasury (Danny Alexander)]

The Government have received representations on a range of proposals to increase economic growth. Indeed, the Budget is about growth. It is about underpinning private sector confidence and creating the space for business to grow, redressing the balance between the public and private sector. Crucial to promoting growth is cleaning up the public finances and the mess that the previous Government left. That is why the OECD document published today described the Budget as “courageous” and “appropriate”.

[Annette Brooke]

Given the difficulties with time lags, for example between decision making and outcomes, how will the Chief Secretary monitor the overall impact of the stimulus given to growth in the private sector and the necessary cuts in Government expenditure, to ensure that we have a sustainable recovery and not a double-dip recession?