Time Stamps (Foreign Exchange)

Austin Mitchell Excerpts

Tuesday 3rd February 2015 Westminster Hall

[Austin Mitchell (Great Grimsby) (Lab)]

I am most grateful for the extra three minutes, Ms Dorries.

I am grateful for the opportunity to raise the important issue of the time-stamping of all customer transactions in the foreign exchange markets. Time-stamping would prevent points from being skimmed off for the profit of the bank or the dealers, which is robbing customers of millions of pounds every year. In other words, it is facilitating theft. We must time-stamp foreign exchange transactions so that the rate at which the contract was made can be authenticated.

I first came across this issue a quarter of a century ago—it seems a long time ago—when a young trader came to me and said that dealers at the bank he worked for were skimming off points on trades on his account for their own profit. That, he thought, was a disastrous, dangerous practice, and amounted to theft from his clients’ accounts. He raised the issue as a whistleblower, and was fired in consequence. He first took the issue to the Securities and Futures Authority—a precursor to the FCA in the alphabet soup of authorities that regulate the financial industry in this country. In a letter to him on 4 September 1991, it said:

“Our own enquiries have confirmed the correctness of the view expressed by Mr Souliotis”—

that is the dealer—

“that although the opportunities for such malpractice appear to be many, the way in which the market operates and the audit trails…make the detection of such abuses altogether more difficult. Our enquiries continue however…To this end, we remain in discussion with the Bank of England.”

The buck passed to the Bank of England, and there it stopped and has remained stopped for 25 years. All attempts to end point skimming by imposing date stamps have been stopped by the Bank of England. Why? What it is doing I do not know, but it has effectively been facilitating theft and creating an atmosphere in which theft is easy and possible, and appears to be sanctioned.

I took the dealer, Mr Souliotis, to see Eddie George, who was then the deputy governor of the Bank of England. Mr George said several things. First, he said that the Bank had conducted a full inquiry. Secondly, he said that point skimming was not happening and the Bank could not find evidence of it. Thirdly, he said that banks as a whole would be too anxious to preserve their reputations to allow such a practice to go on—they are their own best guardians, in other words. Eddie George was wrong on all three counts.

When I took up the issue again under the previous Government, I looked into the inquiry done by Eddie George. The then Governor, Mervyn King, wrote to me on 26 August 2012 to say that the Bank’s investigation into the allegations had not taken place. He said that all the Bank did was ask the American Express bank—for it was they—to investigate itself, which it had. Not surprisingly, the American Express bank came up smelling of roses. Its reply to its self-investigation was, “No such thing has happened. What a terrible thought!” Mervyn King told me that the Bank had not conducted any interviews with any traders from the American Express bank.

After my meeting with Eddie George, I raised the issue in an Adjournment debate in the House. The then Economic Secretary to the Treasury, Anthony Nelson, while denying the accusations, told me after the debate that the Treasury knew the practice went on, but could not produce any evidence on the scale of it or who was doing it. I want to help them produce that evidence of point skimming off clients’ accounts by making date stamps a requirement.

That was where the matter rested, 25 years ago; the bank denied the thefts, the Treasury could not find evidence and the practice was apparently condoned. It has certainly continued since that time; it has come to the surface in the United States. The practices in America are much the same as ours. The two markets are similar and the traders are behaving in the same kind of fashion. The same practices go on in both foreign exchange markets.

The first piece of evidence from the United States is that in 2002, the Federal Bureau of Investigation conducted an undercover operation—a sting, in other words—called “Wooden Nickel”. The US attorney for Manhattan, James Comey, who is now the head of the FBI, uncovered in that investigation rigged currency trades in some of the best of the Wall street banks—the biggest banks. The operation led to 47 indictments, most of which led to convictions. Mr Comey said that

“a troubling thing was that similar rigged trading had been defrauding banks for as long as 20 years.”

I could have told him that.

The second piece of evidence from the States came in 2011, when the state employees’ pension fund in Virginia began a billion-dollar lawsuit against the Bank of New York Mellon, alleging overcharging on foreign exchange transactions for the pension funds. That overcharging included a charge of $135,000 on a $12.5 million trade. The proper rate would have been $6,250. They were given a fake rate and there was no possibility of chasing that up, because there were no time stamps on the transaction. The lawsuit went on.

With that evidence, I thought it necessary to raise the matter again in this country. I went back to what is now the FCA and spoke to Clive Adamson, the director of supervision. As a man from a banking background, he should well know what was going on; he was accustomed to doing banks’ public relations. The FCA told me:

“We are not aware of any evidence to suggest that mispricing of non-negotiated FX transactions is taking place in the UK.”

That was after the American evidence and despite the fact that foreign exchange trading works exactly the same way in the UK and the US. It is a huge market in the United States, with $5 trillion of exchange transactions daily, but the FCA denied the possibility that the same practices could occur here. On 18 March 2014, I took the issue again to the FCA, and Adamson’s view that it was not going on here was unchanged.

On 18 June 2014, with my hon. Friend the Member for Leeds East (Mr Mudie), I met Paul Fisher, the Bank of England’s executive director of markets and co-chair of the sub-group of the G20’s Financial Stability Board, which is looking at structural reform of the foreign exchange markets. We were told that time stamps are not a priority for the Bank of England or market participants. Presumably, the market participants that were consulted and said that time stamps are not a priority were the banks that have been so busy rigging foreign exchange rates that they have been fined more than £2 billion for rigging processes. The banks are obviously trustworthy witnesses on this account when they say, “No, this is not going on. Time-stamping is not necessary.” Those who were not consulted were the pensioners whose funds have been ripped off by this practice of skimming off points on trades that cannot be audited, because no one knows what time they took place. The Bank of England did not speak to pensioners or anyone else who had been ripped off. It seems to have no concern to protect pensioners either. The statement that this practice was not happening in the UK and was not a priority for the Bank of England is total rubbish and untrue.

Time stamps on trades allow auditors to compare the prevailing prices to the price in the trade when it was made. Time stamps allow the customer to know that he is getting the proper rate, because he can check the prevailing rate at the time. A time stamp allows someone to know whether a fair price has been applied to a specific trade and whether it has been done properly for the customer. It is an important and easy reform. It is easy to introduce; there is no difficulty about it. When banks trade foreign currencies among themselves—they are called interbank transactions—they use time stamps. They do not trust themselves, so they use time stamps, but they do not use time stamps when they are trading for customers, so they can rip the customers off. That is what this debate is about.

When shares are bought and sold, the transaction is time-stamped. In the United States, as a result of an amendment to the Government Securities Act in 1993, a time stamp must be used when Government securities are bought and sold. I do not know what the case is with gilts here, but trades in gilts should certainly be time-stamped. When someone buys a Starbucks coffee, it is time-stamped, yet they cannot time-stamp foreign exchange transactions for the benefit and protection of the customer.

Why is the financial industry exempt from time stamps on its foreign currency transactions for clients and why is the Bank of England supporting it? The practice is bad and disastrous. Why are customers left exposed to what amounts to the virtually invisible mispricing of trades that allows points to be skimmed off and makes thefts so easy? Why, when it is so easy to impose time stamps and therefore to know what is happening? It mystifies me. I cannot see the motive behind it and I cannot see the reason for resisting time-stamping for the two decades for which people have been making the argument for it.

Interestingly, Liam Vaughan, a Bloomberg journalist, has shown how things operate without time stamps. He was told by two former employees of Goldman Sachs who were on its foreign exchange alpha team in New York that when a salesman receives an order from a customer, often by e-mail, he executes it and waits to see whether the market changes. If the market goes up, he charges at the higher rate and keeps the difference between the price that was actually paid and the rate charged to the customer; in other words, he skims off. The former employees said that that can make as much as 30 pips on a €10 million trade into dollars—that is, 0.3% of $13.6 million goes to the traders in points skimmed off, unless there are time stamps to show at what time the trade was done.

One can imagine the consequences of very few points—just a few pips—being skimmed off on lots of trade in a market worth $5 trillion a day in the United States. It is no wonder that the dealers do not want to time-stamp the transactions, but it is annoying that the Bank of England—the guardian of probity and regulator of markets—is stalling on the issue and talking of “ongoing reviews” that have been ongoing for 20 years and achieved nothing. Why is the Bank of England doing nothing? It is negligent and shameful that it should behave in this fashion.

I am not interested in prosecuting the lovely banks; I love the banks. I am not proposing that they should be prosecuted for past crimes, because official inaction has given them the green light to commit this kind of theft. However, I want time stamps so that we will have an audit trail and point skimming will be so risky that they will stop doing it. We are now considering, nationally and internationally, reforms of the foreign exchange markets, and the G20 Financial Stability Board is considering the issue. It is essential that, as part of that consideration, we put time stamps at the head of the agenda and stir the Bank of England out of its lethargy. I hope that the Minister will not ask us to wait and see, because my plea is that we should get on with it immediately.

On 8 September 1991, Clifford Smout, who was head of banking supervision policy for the Bank of England, wrote of foreign exchange skimming:

“The existence of such abuses is difficult to prove in a fast moving area such as the foreign exchange market”.

But I am providing a way in which they can prevent it and get convictions; why are they taking so long to do it? My plea is for us to get on with it: let us have time-stamping on all foreign exchange transactions for clients of the banks.

[The Economic Secretary to the Treasury (Andrea Leadsom)]

It is a pleasure to serve under your chairmanship, Ms Dorries. I congratulate the hon. Member for Great Grimsby (Austin Mitchell) on securing this debate on the incredibly important subject of foreign exchange manipulation. He will have been as disgusted as I was to learn about the benchmark rigging that has gone on in financial markets and the various tales of banking misconduct that have shocked and disgusted everyone. I assure him that I do not think that the Treasury or the Bank of England are naive in their determination to weed out bad practice.

By way of background, the foreign exchange market underpins the global financial system. It enables international trade in goods and services, cross-border investment and monetary policy, so it is critical to ensure that it is well functioning and fair for the benefit of countries, businesses and consumers. As the hon. Gentleman pointed out, the UK is the largest single market for foreign exchange trading. In 2013, more than 40% of global foreign exchange trading took place in the UK, supporting an enormous number of jobs and enormous investment in this country.

The foreign exchange market is one of the most deep and liquid markets. It has contributed to efficient wholesale markets in which the turnover can be as high as $2 trillion a day in the UK alone. However, it is vital that all end users can benefit from the market, so we welcome the growth of specialist foreign exchange providers that compete with existing banks for the foreign exchange business of smaller businesses and retail consumers.

On tackling market misconduct, we expect firms operating in foreign exchange markets to adhere to the highest standards of conduct. Where they do not do so, we will take action to prevent and punish bad behaviour, as shown by the recent enforcement actions taken by the Financial Conduct Authority against five banks. The attempts by some banks to manipulate certain foreign exchange benchmarks were totally unacceptable and disgraceful. The Government and the regulators have taken tough action to punish such behaviour and prevent such scandals from happening in the future. The hon. Gentleman will know that the Serious Fraud Office has opened criminal investigations into certain types of market misconduct, and those investigations are ongoing.

First, the Government established the FCA with a specific remit of focusing on the conduct of our financial sector. Secondly, we have laid before Parliament a statutory instrument to extend regulation to the key foreign exchange benchmark: the WM/Reuters London 4 pm closing spot rate. The manipulation of that and six further financial benchmarks will be a criminal offence from 1 April 2015. Thirdly, we have established the fair and effective markets review to conduct a comprehensive and forward-looking assessment of how wholesale financial markets operate, to help to restore trust in those markets in the wake of a number of recent high-profile abuses, and to influence the international debate on trading practices. The review will examine in particular how the wholesale fixed-income, currency and commodity financial markets operate. It will provide recommendations on how the fairness and effectiveness of such markets can be improved.

The Government recognise that market structure and transparency play an important role in making markets more effective. Although the foreign exchange market is predominately an over-the-counter market in which transactions occur bilaterally between market participants, over the past 10 years it has been at the forefront of the electronic trading revolution. The electronic trading side now accounts for more than 60% of foreign exchange trading in spot markets, which has brought significant improvements in efficiency and transparency to market participants.

The use of electronic trading is most prevalent in the wholesale market, however, so it is right for us to consider whether the process of technological development has gone far enough to improve the fairness and effectiveness of markets, or whether we need to take further steps. The principle that how a transaction will be priced should be understood by market participants at the time when they enter into the transaction should always apply.

To deal specifically with time-stamping, the hon. Gentleman argued that if firms were required to provide time stamps for foreign exchange transactions that do not occur at the time of any agreement to enter into such a transaction, it could bring additional transparency to the market. He is of course right that time-stamping would prove the point at which the trade was done. High-quality record keeping is integral to how all financial services firms, including foreign exchange dealers, should organise themselves and operate, so I agree that it is important for firms to keep appropriate records of transactions with clients.

Time-stamping, however, presents some practical challenges. First, the key one is that market participants can use the time stamp only if they have access to a data feed of foreign exchange market prices, but such reference data are not publicly available other than at significant cost. Furthermore, as transactions are undertaken bilaterally, there is no central market for all foreign exchange transactions, so any consolidated tape of transactions would capture only a part of the market. The price of such transactions would also not necessarily be directly comparable. In foreign exchange, the price of each transaction may take into account a range of factors specific to that transaction, such as assessments of creditworthiness.

Secondly, when the foreign exchange dealer acted as agent, market participants would need to understand how the transaction had been priced to understand whether they were charged accurately. The interbank rate cannot be expected to be available to all market participants, for example.

Thirdly, when the foreign exchange dealer acts as principal, it could be argued that what is more important than a time stamp is access to a range of competitive quotes, which indicates that the issue of time-stamping transactions needs to be considered in the wider context of market structure and competition.

Clearly, the main purpose of a time stamp would be to create an audit trail for a market participant to detect mispricing of foreign exchange transactions. We should be clear, however, that if clients were misled about the pricing of foreign exchange transactions, such an act would be fraudulent.

I will talk a bit more about the fair and effective markets review, which I hope will give the hon. Gentleman some comfort.

[Austin Mitchell]

I am grateful to the Minister for her reply, but the difficulties that she has posed are not insuperable—they can be overcome. A time stamp is easier with electronic trading than with other forms of trading, but it should be used in all kinds of trades, because if there is a time stamp the client has the ability to look at the price range that day. The client might not know the total trading, but he can look at the price range and see what time the transaction was made, so he will know whether he was getting a fair deal and a proper price. That is the important thing—to put the knowledge in the hands of the consumer. The difficulties can easily be got around with a will to do so. The question is, why has the Bank of England been allowed to drag its feet on the issue for so long? Why not put that in straight away?

[Andrea Leadsom]

All I can do is repeat what I said, which is that the interbank price is one price, but that will not be the price for a retail investor, such as someone going on holiday or a small business. If we time-stamp a transaction, we will have to have the specific price of that transaction at a given time, and that information is simply not available. For the time stamp to be useful, we would have to know what the market was at that precise time. As the hon. Gentleman pointed out himself, a few basis points make a world of difference to the profits for the trader, so if one were minded to rig the price for a consumer or a business, even a sizeable one, and to commit fraud, even a time stamp need not prevent the fraudulent activity, simply because it would be difficult to pin down what the actual price should have been.

The Government established the fair and effective markets review so that careful analysis of the fixed-income, currency and commodity markets could be undertaken. Part of the review will be to consider whether there should be further regulatory tools available in foreign exchange markets, including whether there is a need for further criminal sanctions. The review will also consider the market structure and whether it can be improved through regulatory intervention or market-led action. Obviously the Government cannot prejudge the outcome of the review, but those conducting it will be well aware of the issues raised by the hon. Gentleman and will be taking his views into account. The Government will consider the recommendations of the review once it reports in June and will provide a response.

In conclusion, the time-stamping of transactions needs to be considered in the context of improving the overall fairness and effectiveness of the foreign exchange market. Foreign exchange markets are by their nature the most global of all the financial markets, so a consistent international approach to their regulation is essential. Where action is warranted, the UK should definitely lead the way in calling for and delivering it. I hope that I have reassured the hon. Gentleman of our commitment to ensure a fair and effective foreign exchange market—one that protects the customer while keeping the UK’s leading position internationally.

Question put and agreed to.

Money Creation and Society

Austin Mitchell Excerpts

Thursday 20th November 2014 Commons Chamber

[Austin Mitchell (Great Grimsby) (Lab)]

I welcome this debate and congratulate hon. Friends on securing it, because we have not debated this matter for over 100 years, and it is time we did so. This House and the Government are obsessed with money and the economy, but we never debate the creation of money or credit, and we should, because, when it comes to our present economic situation and the way the banks and the economy are run, that is the elephant in the room. It is time to think not outside the box, but outside the banks; it is time to think about the creation of credit and money.

I speak as a renegade social creditor who is still influenced by social credit thinking; I do not pledge total allegiance to Major Douglas, but I am still influenced by him. As has just been pointed out, 93% of credit is created by the banks, and a characteristic of what has happened to the economy since the ’70s is the enormous expansion of that credit. I have here a graph from Positive Money showing that the money created by the banks was £109 billion in 1980. Thanks to the financial reforms and the huge increase in the power of the banks since then, by 2010 that figure had risen to £2,213 billion, whereas the total cash created by the Government—the other 3%—had barely increased at all. Since 2000 we have seen the amount of money created by the banks more than double.

That has transformed the economy, because it has financialised everything and made money far more important. It has created debt-fuelled growth followed by collapse. It is being controlled by the banks, which have directed the money into property and financial speculation. Only 8% of the credit created has been lent to new businesses. The Government talk about the march of the makers, but the makers are not marching into the banks, because the banks are turning them away. Even commercial property is more important than makers. That has created a very lop-sided economy, with a weak industrial base that cannot pay the nation’s way in the world because investment has been directed elsewhere, and a very unequal society, which has showered wealth on those at the top, as Piketty shows, and taken it away from those at the bottom.

A very undesirable situation is being created. We have built an unstable economy that is very exposed to risk and to bubble economics, thanks to the financialisation process that has gone on since 1979. The state allocates all credit creation to the banks and then has to bail them out and guarantee them, at enormous expense and with the creation of debt for the public, when the bubble bursts and they collapse.

Some argue—Major Douglas would have argued this—that credit should therefore be issued only by the state, through the Bank of England. That would probably be a step too far in the present situation, given our present lack of education, but we can and should create the credit issued by the banks. We can and should separate the banks’ utility function—servicing our needs, with cheque books, pay and so on—and their speculative role. The Americans have moved a step further, with the Volcker rule, but it is not quite strong enough. In this country we tend to rely on Chinese walls, which are not strong at all. I think that only a total separation of the banks’ utility and speculative arms will do it, because Chinese walls are infinitely penetrable and are regularly penetrated.

We can limit the credit creation by the banks by increasing the reserve ratios, which are comparatively low at the moment—the Government have been trying to edge them up, but not sufficiently—or we could limit their power to create credit to the amount of money deposited with the banks as a salutary control. We could tax them on the hidden benefit they get from creating credit, because they get the signorage on the credit they create. If credit is created by banknotes and cash issued by the Government, the Government get the profit on that—the signorage. The banks just take the signorage on all the credit they issue and stash it away as a kind of hidden benefit, so why not tax that and give some of the profit from printing money to the state?

Martin Wolf, in an interesting article cited by my right hon. Friend the Member for Oldham West and Royton (Mr Meacher), has argued that only central banks should create new money and that it should be regulated by a public credit authority, rather like the Monetary Policy Committee. I think that that would be a solution and a possible approach. Why should we not regulate the issue of credit in that fashion?

That brings us back to the old argument about monetarism: whether credit creation is exogenous or endogenous. The monetarists thought that it was exogenous, so all we have to do is cut the supply of money into the economy in order to bring inflation under control. That was a myth, of course, because we cannot actually control the supply of money; it is endogenous. The economy, like a plant, sucks in the money it needs. But that can be regulated by a public credit authority so that the supply matches the needs of the economy, rather than being excessive, as it has been over the past few years. I think that that kind of credit authority needs to be created to regulate the flow of credit.

That brings me to the Government’s economic policy. The Government tell us that they have a long-term economic plan, which of course is total nonsense. Their only long-term economic plan is slash and burn. The only long-term economic planning that has been done is by the Bank of England.

[Mr MacNeil]

To quote Harry S. Truman, the worst thing about economists is that they always say, “On the other hand”. The hon. Gentleman talks about limiting and regulating how much money is to be sucked in by the economy, but who would decide that? The difficulty is that although the economy might be overheating in a certain part of the country, such as the south-east of England, it could be very cool in others, such as the north of Scotland. What might be the geographical effects of limiting the money going into the economic bloodstream if some parts of the plant—I am extending his metaphor—need the nutrients while other parts are getting too much?

[Austin Mitchell]

The hon. Gentleman often asks tricky questions, but this one is perfectly clear-cut. The credit supply for the peripheral and old industrial parts of the economy, which include Scotland, but also Grimsby, has been totally inadequate, and the banks have been totally reluctant to invest there. I once argued for helicopter money, as Simon Jenkins has proposed, whereby we stimulate the economy by putting money into helicopters and dropping it all over the country so that people will spend it. I would agree to that, provided that the helicopters hover over Grimsby, but I would have them go to Scotland as well, because it certainly deserves its share, as does the north of England. However, I do not want to get involved in a geographical dispute over where credit should be created.

The only long-term plan has been that of the Bank of England, which has kept interest rates flat to the floor for six years or so—an economy in that situation is bound to grow—and has supplemented that with quantitative easing. We have created £375 billion of money through quantitative easing. It has been stashed away in the banks, unfortunately, so it has served no great useful purpose. If that supply of money can be created for the purpose of saving the banks and building up their reserve ratios, it can be used for more important purposes—the development of investment and expansion in the economy. This is literally about printing money. Those of us with a glimmering of social credit in our economics have been told for decades, “You can’t print money—it would be terrible. It would be disastrous for the economy to print money because it leads to inflation.” Well, we have printed £375 billion of money, and it has not produced inflation. Inflation is falling.

[Steve Baker]

rose—

[Austin Mitchell]

I am sorry—I am mid-diatribe and do not want to be interrupted.

It has proved possible to print money. The Americans have done it—there has been well over $1 trillion of quantitative easing in the United States. The European Central Bank is now contemplating it, as Mr Draghi casts around for desperate solutions to the stagnation that has hit the eurozone. The Japanese, surprisingly, did it only last week. If all can do it, and if it has been successful here and has not led to inflation, we should be able to use it for more useful and productive economic purposes than shoring up the banks.

If we go on creating more money through quantitative easing, we should channel it through a national investment bank into productive investment such as contracts for house building and new town generation. Through massive infrastructure work—although I would not include HS2 in that—we can stimulate the economy, stimulate growth, and achieve useful purposes that we have not been able to achieve. This is a solution to a lot of the problems that have bedevilled the Labour party. How do we get investment without the private finance initiative and the heavy burden that that imposes on health services, schools, and all kinds of activities? Why not, through quantitative easing, create contracts for housing or other infrastructure work that have a pay-off point and produce assets for the state?

I mentioned the article in which Martin Wolf advocates the approach of the Monetary Policy Committee. That is how we should approach this. I welcome this debate because it has to be the beginning of a wider debate in which we open our minds to the possibilities of managing credit more effectively for the better building of the strength of the British economy.

The Economy

Austin Mitchell Excerpts

Tuesday 11th December 2012 Commons Chamber

[Austin Mitchell (Great Grimsby) (Lab)]

It is a pleasure to take part in this debate, during which we have heard three excellent maiden speeches. All of them were very impressive, so it is clear that we oldies will have to pull our socks up. As I listened to the speeches, I abandoned my long-standing hope of reaching the shadow Cabinet, because the competition will clearly be too strong.

However, much of the debate, including the last speech from the Government Benches, has been disappointing, as it has been too much about who got us into this mess and not enough about how we can get out of it. We are undoubtedly in a mess: we have a fiscal deficit; we have a massive debt burden; we are in the grip of deflation; demand is very low; we have just had a double-dip recession and we are heading for a triple-dip; unemployment is far too high; GDP is 4% down on 2008, because, unlike most countries, we have not made up that shortfall; the balance of payments gap is now gaping, standing at 7.5% of GDP; and our manufacturing has shrunk too much to pay our way in the world. By any definition, that is a mess.

The question is: how will we get out of this mess? The Government’s policy shows no sign of getting us out of it. It was described at the start as an expansionary fiscal contraction, which is an oxymoron—more “moron” than “oxy”. Their aims have been impossible to achieve because every increase in unemployment means a reduction in tax revenues and an increase in spending to support misery, and the Government are therefore not cutting debt. The Chancellor says, “We’re cutting debt to keep our triple-A rating.” Such a rating goes to a healthy economy with prospects, which our economy is not, and next year we will lose our triple-A rating. Interestingly, the Government are now saying that that does not matter. We will lose that rating because of the disastrous state of our economy.

The only answer is to have growth. It is a simple way of paying off the debt. The only way to pay off the debt is to get growth into the economy, and the only way to get growth into the economy is to stimulate the economy. A few years ago, President Obama put in a $780 billion stimulus through his national recovery Act. We must have such a stimulus, too—although Labour has been very cautious on that—and it can only be paid for by borrowing. There needs to be more borrowing.

The arguments against borrowing are pathetic. Borrowing has become the fig leaf of the Tory party; it covers any failure, and the failures have been fairly substantial. The Government are obsessed; they have a piggy-banking fear of borrowing. We cannot, however, pay off debt and deflate the economy at the same time.

Where else are we to get this stimulus if not from Government borrowing? Individuals and families are burdened with debt, as are companies. They are not spending; they are trying to pay off debt. Spending and stimulus will come only if the Government borrow more, therefore. There is no problem with that. Interest rates are at record lows, and our credit is good at present, so we can borrow, and we should borrow to spend.

We should borrow to build housing. We should have a big housing drive, and most of it should be public housing for rent. That is what we need, because people cannot afford to buy. We should subsidise jobs if necessary, too. We must borrow, spend and stimulate. That is the only way out.

We need more quantitative easing, which I hope will bring the pound down. The pound is now up 8%. When the Governor of the Bank of England starts saying in his speeches that the pound is too high, it must be horrendously overvalued because no Governor of the Bank of England has said that before. The value of the pound needs to fall, to boost exporting industry.

The Government have been very clever at apportioning blame for the situation the country is in. First, they blamed Labour, although our borrowing was essentially to save the banks, and I am sure the current Government would not have wanted us not to save the banks, would they? If they did not want that, Government Members should say so now. The Government then blamed scroungers lying in bed as the strivers go off to work—that is a very touching picture. They then blamed the size of the benefit bill, which we now gather must be cut still further—although not until 2015, after the election, it should be noted. Now they are blaming the eurozone. It certainly has problems but it must be pointed out that the deflation here and the deflation in the eurozone are both being done for ideological reasons. The ideological reason in Europe is that people do not want to give up on the euro. They cannot afford it to break up, so they have to keep trying to make the unworkable work. That is depressing the European economy, because it is producing deflation in all the Mediterranean economies. That deflation in those weaker economies—the uncompetitive economies—in turn produces a fall in demand for German goods; they cannot afford the BMWs and the Mercs any longer, so Germany becomes depressed. We perhaps feel a touch of schadenfreude about that, but it spreads depression right round Europe.

Our depression is caused by the Chancellor’s ideology and his horror of borrowing. We know how to get out of this recession but for ideological reasons no Government are doing what they should do to get of it. The same is true in the United States, where President Obama is being held back from giving any stimulus and cutting taxes for the mass of the population by the Republican desire to cut taxes only for the wealthy. That has produced the fiscal cliff on which the American economy is now hanging.

So there is no prospect anywhere—no certainty—of expansion, and if there is no possibility of growth and expansion, people and companies are not going to invest. All the pious hopes that the hon. Member for Mid Norfolk (George Freeman) has just given us about a resurgence of companies are in vain, because companies will not invest as there is no prospect of profit and no prospect of success. That is the trap we are all in, and we are there because of piggy-banking ideology, ignorance about real economics and simple bad economics in practice, which is killing growth and blighting the lives of our young people.

What do the Government have to offer at the end of this debate? It is pathetic to see that Government Members have not even bothered to turn up to defend the Government; Labour Members have had to do all the attacking and the speaking, because Government Members have had to be dragged in. All the Government have to offer is more debt, more misery, more cuts—£10 billion to £15 billion of them—and more fracking. This Government are one of the best fracking Governments in the world, holding out great hopes that it will provide a new regenerative miracle. That is all they can offer. What they cannot offer is hope, prospects, improvement, growth.

Humber Economy (Fiscal Support)

Austin Mitchell Excerpts

Tuesday 27th November 2012 Westminster Hall

[Austin Mitchell (Great Grimsby) (Lab)]

Let me first express my almost inexpressible pleasure at serving under your chairmanship for, I think, the first time ever, Mr Amess, and also my pleasure at participating in this debate secured by my right hon. Friend the Member for Kingston upon Hull West and Hessle (Alan Johnson), who is a doughty fighter for his constituency. The attendance today symbolises the close co-operation that exists between all MPs of all parties in the Humber area. It is a new and welcome thing, and I hope that it speaks well for our development in future.

I just want to say that I shall be referring to “Humber” —which is a river, not a group of people—or to “Humberside”, as I and other members of the old-fashioned generation call it, rather than to “the Hull city region”, a term that tends to create antibodies on the south bank of the river. Before I came into Parliament I always used to crack jokes about the two banks of the Humber being united in mutual antipathy. However, that was about the rivalry over fishing, which is now gone. Now the future lies in co-operation and working together, in the Humber and through the local enterprise partnership. The hon. Member for Cleethorpes (Martin Vickers) said that North East Lincolnshire is hedging its bets by also participating in the Lincolnshire LEP, but our eggs are really in the Humber LEP basket, because that is our future. The two banks of the Humber will develop together and flourish together or not at all, because falling apart would weaken the magnetic power of both of them as part of the country’s last undeveloped estuary, which has enormous potential for development.

Like my right hon. Friend the Member for Kingston upon Hull West and Hessle, I welcome the Heseltine report, which is a prime indication of what our future should be, involving more localism, more power for the LEPs and more power for the regions, and enough money to compensate for the loss of the regional development agencies under this Government. In an interview with The Guardian yesterday, Lord Heseltine was rather modest when he said that he was not proffering his report as a plan B. I think that he is saying that to make his report more popular with the Government, but effectively it is a plan B for the Government. I hope that we shall see signs that the Government are taking up the very wise advice that Lord Heseltine gave them, because from our point of view it is “the Heseltine, the full Heseltine and nothing but the Heseltine” for regional development. That involves more power and more backing for our LEP. At present, it is under-resourced; it needs a bigger staff and better organisation to carry through its policy. I am delighted that we have a development agency for the Humber, but it needs to be strengthened and resourced in the way that Lord Heseltine says in his report.

A major part of our development prospects must be wind generation at sea. The aim must be for the Humber to become Britain’s cluster of wind energy facilities, industries and development. We started on that path with the Siemens contract in Hull, which has been hovering, and I hope that the new clarity of the Government’s energy policy and the support that the Government will give to wind energy at sea, if not to wind energy on land, will cause Siemens to finalise the contract in Hull, because we need it. We also need the development that is going on in Grimsby to provide service and maintenance for the wind turbines out at sea.

That is not all that is involved in the development of wind energy. We have the prospect of developing a cluster on the south bank of the Humber as well, in the Able UK development, which will also be an industrial facility—a factory area for the creation and assembly of these huge wind turbines. They will be absolutely enormous. It is difficult to visualise them. They certainly would not pass under the Humber bridge erect. We need that factory facility, but we also need the dock facility that could be provided by Able UK, which holds out great prospects for the south bank area. However, it has been held up by all sorts of things. It has been held up by the birds, which seem to hold up most developments in our area; by Natural England, and by planning problems. Now it is being held back by a kind of rearguard action that is being fought by Associated British Ports. I must say that I deplore that action. ABP has a monopoly on the port facilities in the Humber—in Goole, Hull and Grimsby. It is not reasonable for ABP to try to frustrate the development of a competitive facility by Able UK. I hope that ABP’s action can be stopped; we are making representations to the Government to stop that delaying activity.

We need to have those development prospects in the Able UK development on the south bank if the wind energy sector is to flourish as a cluster. Michael Porter’s work suggests that the best form of development available is to cluster an industry, with the research, the ability and the management in one area. I hate to see firms such as Areva going to Scotland. Areva is a French firm, and probably does not understand this country, which is why it is going to Scotland rather than to the much more attractive and alluring situation that is available in Humberside.

I emphasise that we do not need to put all our eggs into the basket of wind energy; we need other renewables too. We need the Government to support and encourage biomass development, which right hon. and hon. Members have referred to. There is the prospect of a biomass development at Barton. What has happened to that? Why has it been held up? Indeed, why has it disappeared from the horizon? The development at Immingham to produce ethanol from grain has been held up, partly by European decisions and partly by Government inertia. We want to develop alternative energies as a cluster development, rather than just having wind energy production, although wind is clearly the major part of alternative energy development, so I put in a footnote for those other alternative energies.

I am reaching the end of my speech, Mr Amess; I know that the look in your eyes is not boredom but enthusiasm that I should continue. All good things come to an end and my speech will come to an end eventually.

In Hull as in Grimsby—the towns are very similar, in their problems and in their make-up—we need a policy of urban regeneration, which could come mainly through housing. The pathfinder project in Hull was aborted by the Government. The housing authority in Grimsby, which is now a housing association, has received no financing for new building this year. It is one of the few housing authorities to miss out on such financing.

We need housing development, because it is a stimulus to the economy. The obvious thing to do when a homelessness problem is building up and a housing crisis is developing is to invest in housing to stimulate the economy in the way that it did in the 1930s. We need that stimulus, in Hull, Grimsby and the whole area. We need more support for the local authorities, which at present are cutting back because of the draconian insistence that there should be a 26% cut in local authority spending before 2015. That is a folly at a time when local authorities could be a big stimulus to development.

As the hon. Member for Cleethorpes said, we need a direct rail link to Cleethorpes and Grimsby. Hull Trains has done wonders for Hull, and we need the same development and stimulus on the south bank of the Humber, which could be created by a direct rail connection to London. That would help industry by making the area more attractive for investment, and it would help communications. We are a bit too isolated for our own good on both banks of the Humber, and a direct rail link would help to alleviate that problem.

Unfortunately, I cannot stay for the Minister’s brilliant summing-up of our case and his total acceptance of the need for development in Hull, because I have to attend a meeting of the Public Accounts Commission that starts in two minutes. However, in a spirit of unctuousness towards the Minister, I must say that we have had a good deal so far from this Government. I welcome those concessions that have been made: for instance, on the Humber bridge tolls; on the cancellation of the historical dock charges, which was carried through; and on the development of the A160. I hope that that progress can continue, because the Government now need to develop and implement the Heseltine report in full.

Professional Standards in the Banking Industry

Austin Mitchell Excerpts

Thursday 5th July 2012 Commons Chamber

[Austin Mitchell (Great Grimsby) (Lab)]

It is good that the debate has come to a calmer and more sensible level. The start demonstrated exactly why the House is incapable of conducting an impartial inquiry. With that degree of partiality and the petty debating points made by the Chancellor, it would be impossible to conduct a serious inquiry into banking.

Let us remember that we are talking not about who said what to whom in 2008, but about the professional standards of bankers. The Government have made a big mistake in trying to shift the blame for the LIBOR manipulation on to my right hon. Friend the Member for Kirkcaldy and Cowdenbeath (Mr Brown) and the previous Labour Government. It is inconceivable that a system of manipulation that lasted five years and which Bob Diamond—the man paid £20 million a year to know what was happening in his company—did not know about could have been caused by a word on the telephone from my right hon. Friend, my right hon. Friend the Member for Morley and Outwood (Ed Balls) or anybody else.

We have so far been silent on the real cause of these difficulties and manipulations. I refer to the problem of deregulation, which has made all this possible. The deregulation here—the big bang—was followed in the United States by the repeal of Glass-Steagall under Bill Clinton. That was the 1937 legislation that wisely enforced the separation of the utility, trading arms and the merchant-banking, casino-gambling arms of the banks. It made distinct entities of them. After its repeal, banks here and there began to come together, with the trading arms subordinated to the gambling-casino, merchant-banking activities, and that set the tone and the ethics.

The result was the end of the old neighbourhood banking system of friendly bank managers in cupboards advising us on what to do with our money and providing money for mortgages and small businesses. All that went, and we had the spectacle of the kind of gambling made possible by all these inventive processes, such as the slicing and dicing, and parcelling out of debt, securitisation, derivative gambling—a form of gambling without gambling tax—sub-prime mortgages and now LIBOR manipulation.

All those practices were made possible by the new ethics of the merchant banks. A new greed entered banking, and the only ethic at the top was greed. If people such as merchant bankers have too much power, it follows that they will abuse it. It follows that if they have too much power, they have to be regulated. It was the repeal of regulation and the passion of both parties—the Tories were more passionately anti-regulation than we were, but we still deregulated too much—that created the opportunity for this to break out into the mess that it did.

We have had a whole series of manipulations. I came across another one in 1992, when a young American trader with American Express bank came to me and said that points were being skimmed off foreign exchange transactions. Points that should have gone to the owner of the fund—the customer—were being taken by the dealers for themselves. We are talking about only a couple of points—one or two points—but added up over a long period, it came to huge sums of money, given the enormous numbers of transfers being made. Everybody pooh-poohed it. I took that trader to Eddie George, the Governor of the Bank of England, who told him, “No, it wouldn’t happen here. We’ve inspected the bank. Nothing like this is going on,” but it just was not true. It was going on, and now in America there is a lawsuit against New York Mellon bank for £2 billion that was skimmed off by traders in foreign exchange transactions. If that is going on in the States, it is going on here, and the only way to deal with it is through quite simple regulation to require time-stamping of all trading transactions.

Similarly, the ethics of the banks can be dealt with more effectively not, as Vickers puts it, by ring-fencing their two functions, but by driving them apart totally. That way, the neighbourhood banks—the local banks, the trading banks—can return to their old priority of serving the customer, the locality and local businesses, providing money for them and their transactions, while the merchant banking can continue its gambling elsewhere, I hope in a way that is more restricted by legislation and less prone to simple cheating. That is the only way to deal with these issues.

In conclusion, we have heard a lot of arguments about whether we should have a judge-led inquiry or a parliamentary inquiry. A parliamentary inquiry would be nice—it would allow us to play Perry Mason for a while and get a few headlines—but ultimately people will not have faith in it, because the Government have a majority and we have seen how they would react to the situation already. There is therefore no point in setting up an inquiry that people will not have faith in. We need a full and fair inquiry—a judge-led inquiry—to know what is going on and to tell the people.

Jobs and Growth

Austin Mitchell Excerpts

Thursday 17th May 2012 Commons Chamber

[Austin Mitchell (Great Grimsby) (Lab)]

To say that the Queen’s Speech was disappointing is not quite to plumb the depths of the inadequacy it demonstrated. Without being able to speak for Her Majesty, I am solidly assured that she would not have made the long and arduous journey from Buckingham palace had it not been for the certainty that I would be taking her photograph as she arrived here. Really, it was not worth her while to come down here for such a rag-bag of petty measures.

The Queen’s Speech was pathetic. It was pathetic because it is now about all the coalition can agree on. The glad confident morning of 2010 has given way to the bleary bickering, downward slope and near break-up of 2012. It was pathetic because it contained nothing about growth, the major problem in our economy, except for the ability to fire people, adding to the unemployment rolls. It was pathetic because it ignored the damage that two years of this Government’s disastrous economic policies have already done. My right hon. Friend the Member for Morley and Outwood (Ed Balls) set that out admirably.

Two years in, here we are in a double-dip recession, with youth unemployment reaching one in four—the rate is higher in Grimsby. The Office for Budget Responsibility is having to spend all its time revising its predictions downwards because they are no longer adequate for this Government’s failures. “I’m walking backwards for Christmas” should be the OBR’s theme song, were it not for the fact that it mentions Christmas—there is no Christmas at the end of this process. The economy has shrunk by 4%, and that is cumulative over the period, so the total shrinkage must be about 10% or more. A much smaller economy is bearing the same burden of debt, so our ability to pay it has shrunk and the standard of living of everyone in this country has shrunk. Hard-working families—non-working families, as well—are facing a burden of cuts and high inflation.

For me, sitting here today is a re-run of 1980-81, watching Conservative Members clutching at any pathetic straw, any pathetic glimmer of hope in the encircling darkness, to cheer themselves up. Margaret Thatcher had the Falklands to rescue her from that dilemma, but I doubt that this Government will have a Falklands to save them, because what they are producing is a decline—a shrinking—of the British economy and of everybody’s standard of living, all in the name of a neo-liberal ideology of rolling back the state. That ideology is plainly inadequate, wrong, prejudiced and damaging, because the only way out of our current situation is growth—economic growth, which increases our ability to pay off debt, as our Government paid off debt between 1997 and 2000. It is growth that revives the economy, growth that generates jobs, and growth that the people now want, but we will not get it if we follow this Government’s agenda.

I have done extensive research and can pronounce, with real authority, that the economy now needs three things: first, demand; secondly, demand; and thirdly, demand. Without the prospect of demand, business will not invest; the banks will not lend; closures on the high street and in the productive economy will continue; and firms will not spend their resources. No one will create jobs without demand to ensure the prospect of profit. Lack of demand clouds every prospect in this nation today.

How can we best achieve demand? My right hon. Friend the Member for Morley and Outwood has set out a five-point plan, which I heartily agree with. I would go further by borrowing more and spending more. I would give a two-year national insurance holiday for the employment of young people and for areas of the country in recession. I would boost the regional growth fund, whose achievements are pathetic, particularly in Yorkshire and Humberside, which got only 6,300 jobs, or about the same as the south-west and less than the north-west, both of which have lower unemployment rates than we do.

I would also borrow to build houses. We need a big housing programme of the kind that took us out of recession in the 1930s. The housing report published this week showed the problems and how they are accumulating. We cannot solve them unless we build houses for people who cannot afford to buy, who now make up the great majority of the population. To do that we can raise money through housing loans for councils, or we could take some of the money that is put into the banks through quantitative easing and give it to housing contracts instead, which will then be paid off over a period of time. The message to the Government that I wish the Queen had given is simply, as Bob Dylan put it: “Turn, turn, turn.”

--- Later in debate ---

[Mr David Anderson (Blaydon) (Lab)]

rose—

[Austin Mitchell]

rose—

[Mr Jones]

I am not going to give way, because I do not have much time.

It is tempting to change course, but the low interest rates vindicate the Government’s strategy to date. The problem is that, while we are laying that foundation, the next area that we need to build on is being greatly restricted, owing to extremely low levels of confidence among the business community and consumers. Most people in this country are caught in the headlights of the oncoming eurozone crisis. We can all see it coming, and at the moment we are holding back. We desperately need a resolution to that crisis. It is going to be difficult but, one way or another, we need the certainty of knowing what is going to happen when we go into it and come out the other side. Only when we get over the problems that are undoubtedly coming down the track will confidence levels really start to shift.

In the meantime, the Government are working hard to create growth domestically, but that cannot afford to be based on short-termism. It must be based on long-term sustainability, and we need to rebalance the economy. We cannot simply rely on the service and retail sectors. They are massively important to the UK, but they have been completely sustained by private debt and Government spending. I know that the Opposition still think that that is a sustainable option, but we certainly do not.

We need to concentrate on sectors that can create real wealth within the economy so that it can be distributed and we can create jobs from it. We need to concentrate on sectors such as agriculture and manufacturing. I welcome the inclusion in the Queen’s Speech of the proposal for the Groceries Code Adjudicators Bill, which I hope will make the farming industry more sustainable as we go forward.

We need to build on what the Government have done for industry by reducing corporation tax and introducing an extension of above-the-line research and development tax credits. The regional growth fund and enterprise zones are starting to build on the resurgence of British manufacturing, and we are starting to see a real build in R and D investment in our manufacturing companies, which was previously lacking. We now have that factor working in our favour. We also have far better management than we have ever had in our motor manufacturing companies, while we also have far more moderate unions than we had in the past.

Those three factors help to explain why we are seeing this resurgence and are now in a positive surplus with our car manufacturing exports, which has not been achieved since 1976. Back in 1976, as many Members will know, we were absolutely blighted: we were blighted by difficult industrial relations; we were blighted by poor management; and we were blighted by a real lack of investment in R and D. In the short time available, I urge the Government to try to maintain this resurgence in British car manufacturing industry, so that we can see the west midlands go from strength to strength, while supporting jobs in the retail and wider service sector as we go forward.

Amendment of the Law

Austin Mitchell Excerpts

Wednesday 21st March 2012 Commons Chamber

[Brandon Lewis]

I congratulate my hon. Friend on securing that debate and I look forward to joining him on Tuesday to discuss the issue in more detail.

No Budget stands alone, and what is important about this one is how it builds on what has been done in the past couple of years, particularly for business. When we consider how we want to move forward in having an economy that grows, with more jobs and more prosperity for all, it is important to remember that we need to rebalance our economy and have growth in the private sector. So the moves that have been taken for business are hugely important, and the further lowering of corporation tax and the speeding up of that process is very welcome. It makes it very clear that our door is open for business. When private sector businesses grow, they need more staff and more money. Less is then spent through the welfare state and our whole economy benefits.

The change in the top rate of tax, which gets rid of the 50% rate, is also important. Apart from the economic arguments that have already been rehearsed today, that has a psychological impact. A message goes out to high earners—the people who are business leaders and business owners—that we value the work they do. People who aspire to get to that position see that they can work hard, develop and grow their business, and benefit as well.

[Austin Mitchell (Great Grimsby) (Lab)]

Does the hon. Gentleman accept that as well as giving those people that possible incentive, the change also gives them an incentive to spend more time on the golf course?

[Brandon Lewis]

That shows a lack of understanding of how the business world and business leaders work.

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[John Healey]

My hon. Friend is right. This might well become a Budget in which the closer people look, the less they like. That might apply to the granny tax, as he suggests, but it might also apply to the threshold for the 40p top rate of income tax, which many people might find themselves hit by over the next few years, rather than benefiting from the raised threshold for payment in the first place.

The consequences of the Government’s actions at a national level are already becoming clear. The UK economy grew by 3% in the year before the Chancellor stood up and delivered his spending review in 2010. In the 12 months that followed it grew by just 0.5%. That is because he took the decision to cut too far, too fast and choked off growth. Based on the economic projections we heard today, this country is still set for feeble growth in the coming year and the year after. It seems to me that a credible economic plan to deal with the deficit must be supported by a successful plan for jobs and growth alongside it. At present, the Chancellor is condemning Britain to being a one-legged man in a three-legged race. The International Monetary Fund has made a similar point, stating that

“growth is necessary for fiscal credibility.”

We have to look harder at what we earn as a country, not just what we spend. The UK’s GDP last year was still nearly 4% lower than it was before the global financial crisis hit in 2007-08. In other words, our economy was smaller and our national income was lower. If we draw a comparison with the US or with Germany, we find that both countries have a more balanced approach to dealing with their deficit, both countries are growing more strongly than Britain and both countries now have economies that have regained the loss of productive capacity which everybody in the modern, developed world suffered during the global financial downturn of 2008.

[Austin Mitchell]

That is a very important point. My right hon. Friend will know that the Institute for Fiscal Studies Budget forecast makes the point that that 4% now lost is lost for ever: it is 4% lost every year into the future.

[John Healey]

Indeed, and that is one reason why Britain is so far off the economic pace, and why so much more must be done than has been so far to boost jobs and growth in this country.

To use the household income analogy, well loved of the Tory party, I note that if a household looks to pay down its debts at the same time as reducing its earnings, the spending cuts that it must make to do the job have inevitably to be more savage and to last for longer in order to be successful. That is the position this country is in.

If I look at the consequences of the Government’s action locally, I have to say that in south Yorkshire, our area, it is hurting but not working: flat growth, higher unemployment, higher bills, lower confidence. In our area, more than 12 people are now competing for every single job that becomes vacant, and the number of young people without a job for more than six months has more than doubled in the past 12 months alone.

At a time when courts, hospitals, councils, civil service, police and fire service are all cutting public service jobs, any difference that there may be in south Yorkshire between public sector and private sector pay rates is simply not the reason why growth is being held back; it is the loss of jobs, of pay and of support through working tax credits that is sapping demand and confidence.

The Chancellor this afternoon singled out for special treatment those earning more than £150,000 a year, cutting their 50p income tax rate and giving them a tax break that is worth more to those people than many in Rotherham or Barnsley can earn in a year. With more than 800 households and families in Barnsley and more than 1,000 families in Rotherham—working hard, working part-time—faced next month with the total loss of their working tax credit, which could amount to almost £4,000 a year or £70 a week, the Chancellor’s decision to cut the top rate of tax at this point will simply not be accepted or understood.

Let me turn to several of the Budget measures. Any performance report on the Government would be hard put to place the Department for Business, Innovation and Skills anywhere other than close to the bottom, and any judgment on policies would be hard put to say that business support policies have been anything other than close to failure. The Merlin project was supposed to lead to a 15% increase in lending this year; in fact there was a net reduction of £11 billion in net lending to small firms. There was a similar failure of the regional growth fund, of the business growth fund and of the national insurance holiday for small firms.

I look in this Budget with a degree of welcome, however, to the new credit scheme for lending to small firms, and to the new managed funds for lending to mid-sized firms. Those may be small in scale, but they are a start. The margins to make lending more affordable may be modest, but the design and concept, at least, are innovative. Interestingly, the schemes signify that the Government recognise that they were wrong when first elected to say that there was no role for active government and that the private sector would pick up the slack if the public sector stepped back.

The schemes are interesting because they help to reduce risk and cost by using the power of the Government to stand behind them rather than support being funded up front. I say to my hon. Friend the Member for West Bromwich West (Mr Bailey), who chairs the Business, Innovation and Skills Committee, and the hon. Member for Chichester (Mr Tyrie), who chairs the Treasury Committee, that I hope that the Select Committees will make sure that those schemes do not fail as the other business support schemes have and that they provide more lending and lead to more economic activity and support for business in every region of the country.

International experience and all the data underline the fact that, in the long run, high levels of business investment are at the heart of strong economic growth. It seems to me that the case is clear, and has been so since the global financial crash and the requirement for Government to step in and provide big public support to commercial banks, that now must be the time to set up a British investment bank—the sort of industrial investment bank that Germany, Singapore and India have, which can offer strong support to indigenous research and development, domestic manufacturing and regional economies.

The Chancellor told us this afternoon that, taken together, the anti-avoidance measures in this year’s Finance Bill would increase tax revenue over the next five years by about £1 billion. It is interesting that table 2.1 in the Red Book indicates only about a quarter of that over the five years, and that is about half what we did in our first year in government. You, Madam Deputy Speaker, will recognise in the proposal for a general anti-avoidance rule, which I welcome, the same approach that we took and you fought for, against Tory opposition, in respect of the disclosure rules in the Finance Act 2004.

This Chancellor’s Budget was a rich man’s Budget. He chose to cut the top rate of tax and give a kick-back for the rich—and at a time when the deficit is getting bigger, not smaller, when the national minimum wage for young people has been frozen and when the working families tax credit and public services are being cut across the country. This is not a Budget for working people, and the Government are not working for working people. It is not now, and never was, a question, as the Government claimed, of the richest bearing the biggest burden; this Budget proves that the richest are getting the biggest benefit.

--- Later in debate ---

[Austin Mitchell (Great Grimsby) (Lab)]

I cannot agree with my neighbour, the hon. Member for Gainsborough (Mr Leigh), on this Budget, because from both a Labour and an objective point of view it is a pathetic Budget. It is justified by a lot of bravado and bluff, but it does nothing about the major problem of an economy that is nearing recession and needs drastically to boost growth if we are to get out of it. The Budget even fails the five tests for a successful Budget that Anatole Kaletsky proposes in The Times today. The three most important of those are that the Budget should be fair to all—this one is not; that it should be pragmatic, which this one is not, because it is ideological; and that it should be relevant to the problems of the day, which this one is not.

What this Budget does is prolong the failed policies of the past two years of cut, freeze and squeeze, which are not working and need to be ended. The Budget is a disastrous prospect for the Government, because this is the hinge point of power and this Budget means that, instead of strolling to a tax-cutting election victory in 2015, they are faced with flatlining. The huskies pulling the sledge are going to have to pull even harder to get it moving at all. We have already lost 4% of GDP—the economy is that much smaller, according to the Institute for Fiscal Studies—and that will never be made good. We face flatlining, as Japan did in its wasted decade.

The Liberal Democrats have made a desperate attempt to distract attention from that failure. They argue that the rich have been taxed to show that they have got something out of the coalition. They were trying to stop the reduction from 50 to 45%, proposing a mansion tax, a tycoon tax—perhaps it was a Typhoo tax—or something to tax wealth. Well, we have got the cut in the 50% rate, which the HMRC study did not prove brought in big revenues. However, it did not wait for the deferred taxation to come into play—it would do so only with a longer period of running that tax. The public did not want the cut in that tax, which demonstrated that we are all in it together, but it has been cut and the Liberals have got very little in return.

I am not sure what the Liberals were expecting, because what is the Tory party about but helping the rich? After all, this is a Government of millionaires, for millionaires, by millionaires, so we would not expect them, as the Liberals seem to have done, to be giving a tax increase to the rich. What they have given is a couple of symbolic pecks at wealth, but they are more like love bites than serious damage. It does not help that the Government have raised tax allowances in the way that the Liberals wanted. It was a good idea to raise them, but I must point out that that does not really help the poor who do not pay tax, or pensioners—it does not compensate for the VAT increase, for the loss of tax credits and for the child benefit cut. The main benefit goes to the second highest decile of taxpayers, rather than to those at the bottom. So that is the only crumb they have got out of it. The coalition Government are beginning to look like Downton avenue, with the millionaires living upstairs—[Interruption.] Sorry, I meant Downton Abbey. I was thinking about Coronation Street. We have a Government of millionaires living upstairs and the domestic servants are downstairs grumbling, because the only prospect they have now is to go hawking their consciences round television studios to explain why they are getting nothing out of this coalition.

Not only is the Budget not fair—it is certainly not fair to the north and to the area I represent—but it has failed Kaletsky’s second requirement, because it is not pragmatic. It is an ideological Budget because it is obsessed—still crazy over Thatcherism, after all these years—with debt. The problem of this country is not debt. If there is growth, debt can be paid off easily, as the Labour Government did between 1997 and 2000. The problem facing us is a lack of demand. That is why shops are closing in the high street and chains are going bust. Firms are not growing, investing and expanding because they cannot see a demand for their products. As long as that remains the case and as long as there is that uncertainty, we shall not get economic growth. People are being given more hours in which to shop with money that they have not got. Demand is crucial to this economy. It is far too low and it needs to be boosted, but it is not being boosted. There must be a boost to demand.

That brings me to the third failure in the Kaletsky tests. The Budget is not relevant to the economy as it is today. We are an economy verging on recession. We have had a massive loss of growth. We need growth and there are only two ways of getting it. The first is by monetary means. The Bank of England is doing its best with quantitative easing, but that is going into the banks, which are not lending it. It is building up their reserves, rather than going out to the people who spend and generate demand. Secondly, there is the fiscal weapon, which the Chancellor obstinately refuses to use. Only growth will pay off debt. Unless we get growth in the economy, there is no chance of paying off the debt in the way that the Chancellor wants. The only way we will get growth is to borrow, to spend and to let the multiplier work its magic, as Keynes told us it would. That would work, but these policies will not.

Simon Jenkins suggests helicopter money—putting the money in a helicopter and dropping it out on the people, who will spend it. If it drops out on Grimsby, I will be very grateful, but a more sensible way would be to use the money from quantitative easing to sign contracts for a big house building programme to create public housing for rent, which is badly needed in this country, and for big public work contracts. Some of the money should be put in a national investment bank, with an industrial policy to invest in manufacturing and expansion. That is the way to spend the money from quantitative easing.

The Bank of England cannot do that. All it can do is buy debt and give the money to the banks, which stash it away in their reserves. The Chancellor can decide that the money printed by quantitative easing should be used for those benign purposes, and he should, because that would give us growth. Also, there should be municipal bonds for house building, as we used to have, to boost the finance for house building.

The Budget is a failure which foretells three years of bumping along, not on the bottom, but flatlining for an economy which desperately needs to grow to compete with the Americans, whose economy is growing, and to benefit from their growth. The economy should be stimulated by public spending and projects such as house building to get us out of the mess we are in, and I do not see any symptom of that following this Budget.

Jobs and Growth

Austin Mitchell Excerpts

Wednesday 12th October 2011 Commons Chamber

[Austin Mitchell (Great Grimsby) (Lab)]

I knew something was desperately wrong with Government economic policy when I heard last week that the Prime Minister had to be forcibly restrained from telling us all to pay off our credit card debts. It was as though he had never taken a degree at Oxford in PPE—politics, philosophy and economics—with first-class honours or had learned nothing from it. I think his father would be well qualified to ask for his money back from Oxford, because that goes directly against Keynes’s advice on the savings fallacy, which is “The more you save, the more you compound recession.” It also runs against the advice of the Office for Budget Responsibility, which predicated what pathetic growth is going to occur the next year on consumers building up consumer debt to pay for products, increasing demand.

I cannot launch the same accusation against the Chancellor because he took a history degree. He does understand economics, but as far as I can see he thinks he is the reincarnation of Montagu Norman: he has the same policy and economics as him. Neither of them, in their obsession with debt and borrowing—also well exemplified in the last speech—shows any consideration, or knowledge, of demand. Because demand is so weak in our economy, there will be no investment, and if there is no investment, there is no increase in production and no increase in employment. If there is no increase in either of them, there is no growth, yet it is only growth that will allow us to pay off the debt we have accumulated. Demand is the key problem, and the obsession with debt obscures it. Instead, the Government compound the problem by cuts that are going to kill recovery.

The folly of that is that we are freer than any other country to act for ourselves and to take measures to expand the economy and boost demand. Europe is locked into the euro crisis—a self-generated crisis—from which we were saved by my right hon. Friend the Member for Kirkcaldy and Cowdenbeath (Mr Brown), who, thank heavens, kept us out of the euro. Greece and the other Club Med economies, which must include Ireland now that the gulf stream is warming up the Irish economy, cannot devalue or escape from the crisis by reducing interest rates, so they are trapped. We are not. We can reduce interest rates, and we can devalue; indeed, we have devalued. We can use all the weapons of economic management that the euro prevents.

Nor are we in the same trap as America. Its President is effectively trapped by a Republican Congress whose members have “Tea Party economics” embossed on their foreheads, and can neither increase taxation nor boost spending. We are free to act—yet that freedom has been abused by action that is directly counter-productive, and based on piggy-bank economics rather than any manifestation of economic sense. Such a policy would be appropriate for a Government of millionaires who could sit comfortably on the piles of their money and say, “A few more sacrifices from the working class, a few more unemployed, a few more public servants fired, and we’ll all be better off: Britain will win through thanks to the sacrifices of other people.” However, it bears no relation to economic sense, so it will not work.

Our recovery was always going to be slower. The recession hit harder here because of the exaggerated financial sector that has resulted from the destruction of so much of our manufacturing—particularly the Thatcher destruction of the 1980s—and the fact that so much of it is now foreign-owned. However, we must not compound our difficulty and make recovery even slower by dragging out a period of low growth. Unless policy is reversed and we have a plan B—I have a name for the great day when policy is reversed; I am going to call it national B-Day—we shall be doomed to a winter that will be hard, miserable and tough, in which unemployment will increase, more people will be put out of work to increase Government borrowing and Government debt, and more small businesses will be destroyed.

Eurozone Financial Assistance

Austin Mitchell Excerpts

Tuesday 24th May 2011 Commons Chamber

[Austin Mitchell (Great Grimsby) (Lab)]

I largely agree with the argument about the incompatibility of eurozone countries, as the hon. Member for Stone (Mr Cash) outlined, although I do not agree with his defence of the Government. If we pay tribute to anybody it should be to the previous Chancellor and then Prime Minister, my right hon. Friend the Member for Kirkcaldy and Cowdenbeath (Mr Brown) who, against great opposition from the Liberal Democrats and from sections of the Labour party, kept us out of the euro and avoided the consequences that have fallen on the eurozone states that are now in need of support and finance.

I do not think that the hon. Member for Bristol West (Stephen Williams) should feel uncomfortable about his lonely defence of the euro as he sits there like an Amplex advert on two empty Benches—because nobody wants to sit with somebody who is going to defend the euro in his kind of fashion—as the Liberal party policy has always been, “My euro right or wrong.” I can well remember, as can many others, the exchange rate mechanism crisis. Just as the ERM was about to collapse, there were the Liberals chanting, “Move to the narrower bands now” in unison with a lemming-like folly, which the hon. Gentleman demonstrated again today. He should not worry about this peculiar position; he should say with triumph that the Liberal Democrats have persuaded the coalition into accepting and financing these bail-outs. It is not a small sum. He mentioned a liability for £7.5 billion—this from a Government who are cutting Sure Start children’s centres and police budgets and who cannot afford anything for beneficiaries in this country, yet who are prepared to back a bail-out that could cost us £7.5 billion.

To have persuaded the cautious Conservatives, who have always been rather sceptical about Europe, to accept that position must be a triumph for the Liberal Democrats, in which I think they should rejoice. It is a demonstration of the impossibility of the eurozone’s working. What we are being asked to do today is pay for the consequences of the fact that it could never have worked because it brings together incompatible economies. It brings together the southern economies, which are frankly uncompetitive, and many of which are close to defaulting in any case, and the powerful German economy, where inflation is kept very low by agreement between the two sections of industry, continuous investment and continuous improvement.

The southern economies, which have higher rates of inflation and lower rates of productivity, can never keep up. The gap therefore widens, and Germany comes more and more to dominate the European economy, to a point at which the others must deflate to clear the deficits caused by their balance of trade with Germany. That is the incompatibility with which we are dealing, and that is the cause of the problems of the southern states in which we are being asked to involve ourselves—although we kept out of the euro, in the face of some derision from the Liberal Democrats and, indeed, liberal opinion in the country as a whole.

We kept out, so why should we be responsible for the failures implicit in the euro? There are only two possibilities for the countries that are now failing and needing help or the ability to default. They can deflate, which they are being asked to do to a degree that is impossible for their electors to accept, or they can get someone to write off their debts, a strategy mentioned by the hon. Member for Rochester and Strood (Mark Reckless). They cannot do what France and Italy did for many years when they became uncompetitive and their balance of payments deficits built up, and simply devalue. Such action was precluded first by the European exchange rate mechanism, which broke up because it became impossible, and it is certainly precluded now by the euro. These failing countries can have no recourse to either reducing interest rates or accepting adjustments to the exchange rate, as this country has done, and they have therefore moved towards a crisis.

I cannot conceive why we—having kept out of the euro and warned of the consequences of joining the euro, and having drawn attention to what was implicit in a system that brought together incompatible states with different rates of productivity and competitiveness and with no central mechanism to redistribute or help them with their difficulties—should be asked to contribute to the bail-outs, and I therefore strongly support the motion. I cannot see what the sob sisters who tabled the amendment have to offer by saying, “Let us talk about it later.” Let us talk about it now, because the House must be the master of its own destinies and the country’s destinies.

This cannot be left to a Government who, in European matters, are always facing the threat of the tar baby. One contact with the euro, and countries are dragged in; one contact with Europe, and they are dragged endlessly into further and further commitments to a line that is impossible to hold. We should say in the Chamber today, “We cannot hold this line. We will not help to hold this line. It is not our problem.”

[Several hon. Members]

rose—

Public Sector Jobs (Grimsby)

Austin Mitchell Excerpts

Tuesday 17th May 2011 Westminster Hall

[Austin Mitchell (Great Grimsby) (Lab)]

I am grateful to be able to raise the issue of the transfer of between 20 and 30 compliance staff in Her Majesty’s Revenue and Customs and 20 Valuation Office Agency staff out of Grimsby, where they are happily living and working. Grimsby is a very good place to live and work, but they are being transferred away, reluctantly in most cases. I raise the issue because the Treasury is responding this week, and the responsibility is HMRC’s.

The numbers are small, it is true. HMRC states in its impact assessment that they are

“less than 1% of those employed within the local authority area. It is therefore reasonable to infer that the local economy is not dependent on the HMRC presence at this office.”

That is true, but they are simply part of a wider exodus from Grimsby and other smaller centres produced by the concentration policy, designed to concentrate Government services in larger centres and so to dispose of property and to produce efficiency savings.

In the context of that wider problem, Dame Lesley Strathie, the chief executive of HMRC, is the new Moses—leading her people not into the promised land but out of it, because Grimsby is surely the promised land and the best place for those people to be. She is leading them instead into some traffic-jammed wasteland of a bigger city, where they do not want to be. That is counterproductive, expensive and wrong. They will all have to drive for well over an hour, at enormous expense, to a destination where they do not want to work or be. I apologise to the Minister, because he is dealing not only with the issue of HMRC staff but with the policy of concentration and its impact on Grimsby and other small centres.

The impact is damaging, and Grimsby has higher unemployment than most of the country, in common with a lot of other one-industry towns in which the industry has declined. Grimsby needs jobs—public sector jobs: 21% of employment in Grimsby is in the public sector, compared with 9% in a place such as Wokingham in the prosperous south. Any transfer or loss of public sector jobs, therefore, has a disproportionate effect in Grimsby.

We have a higher proportion of the work force in manual jobs in north-east Lincolnshire than in most of the rest of the country, and fewer people in white collar and managerial jobs. According to the figures, 20% of the work force are classified under the categories of managers, senior officials and professionals, as opposed to 30% for Great Britain overall.

It is a great shame that the founders or forefathers of Grimsby did not take the trouble to invent a Grimsby building society or a Grimsby insurance company, such as the Norwich or the Halifax, which can continue to give employment to local people. We have not got that. We need more white collar and professional jobs in the employment mix, not only to leaven the lump—I should not describe it as that—but to widen employment prospects, providing more diversity and a better choice of careers for young people growing up in Grimsby. Those are the very jobs being taken away from us, however, by transfers based on what I see as a series of wrong decisions—by an act of folly.

Let me turn to specifics and, in particular, to the HMRC tax compliance staff, who are widely praised. In our deliberations on the Public Accounts Committee, we praised them for their achievement in recouping tax and for their great service. They have been praised by HMRC itself. Twenty-nine of them work in Heritage house, which is available to them until 2021—I think it was built to house Government departments and services, and it is certainly co-owned by Mapeley Estates, of glorious memory.

I cannot see why there is a rush to leave Heritage house. Why the exodus? The heads of the Valuation Office Agency and the chief executive of HMRC give different reasons for moving out of Heritage house, which will still be available. People from other departments, notably the Crown Prosecution Service, are also fleeing. That is part of the wider problem. The exodus involves not only HMRC, the Valuation Office Agency and the Crown Prosecution Service, but VAT staff and, we now hear, Jobcentre Plus and Department for Work and Pensions staff. All of them are moving out of Grimsby. Why the exodus from Heritage house? What is the effect on Heritage house?

Those people do not need to leave Grimsby at all. The HMRC staff could certainly be transferred to Imperial house, which also houses Inland Revenue staff. Thanks to the reduction in the Revenue staff employed in Grimsby, the fourth floor is now vacant. HMRC has to hang on to it—the fourth floor cannot be lopped off and turned into an entertainment centre, disco or whatever, to alleviate the problems of the staff. If the staff have to be transferred from Heritage house, why can they not be transferred to the fourth floor of Imperial house, to work with the other tax staff?

They are not being offered that, however, and nor are they being offered the opportunity to work from home, which they told me they could do. Instead, the proposal is to transfer them to Hull or to Cromwell house in Lincoln. The chief executive of HMRC told me that the policy was to

“consolidate its teams into fewer sites and place more location-specific work into larger, more efficient teams in urban centres.”

That will be costly, because both Hull and Lincoln are more than an hour and a quarter’s drive away. If people are transferred to Hull rather than Lincoln, they will have to pay £30 a week in toll charges on the Humber bridge—an expensive business which, incidentally, was not mentioned in the impact survey.

If staff who are transferred must travel for more than an hour—these people will be travelling for well over an hour and a quarter—their travelling expenses must be paid for five years and not only for three years. The department’s calculations are made on the basis of three years’ payment of travelling expenses, for 27 staff I think, at a total cost of £492,000. I think it would be a higher figure than that to transfer those staff to Lincoln: probably £600,000 or more, because they have to be paid for five years given the distance involved. That is deemed by the Treasury to be taxable income. We are taking on a major expense for a minimal service, and shuffling expenditure from the property portfolio to continuous travel expenses. If staff are transferred to Cromwell house, they will arrive there knackered. The drive is not pleasant—I do it quite often—and the drive to Halton is even worse. I like going to Lincoln, but it is unpleasant driving there, particularly at peak travel time.

I am not sure whether it is HMRC’s intention that compliance staff should arrive at Lincoln after an hour-and-a-half drive exhausted and bad tempered, so that they will be more aggressive with the claims they deal with and produce an even greater return. I hope that is not the intention, but it will certainly be the effect. The work done by HMRC staff is not local but non-specific; however, that done by VOA staff is largely local. In the recent fracas about retrospective property valuations, VOA did not have enough staff to complete them. They should have been done from 2006 onwards, but there were not finished until 2010 because of staff shortages arising from efficiency decisions. Yet it is proposed to move staff.

The problem varies in each department, but the overall transfer of not only HMRC staff but staff in other departments is damaging to the employment mix in Grimsby and the recruitment prospects of young Grimbarians, and is unnecessary. I am sorry to say that it will also be damaging to the work, morale and lives of the staff who will be shuttled around willy-nilly, because they do not want to go. They like living and working in Grimsby, which is understandable; I do, too. Why must they move when it would be cheaper for them to continue working in Grimsby, it is expensive to move them to Lincoln, and there is existing office space in Grimsby?

The policy is short-sighted and wrong. It is yesterday’s policy from the mid-noughties, and it is being forced on today’s work force at a time when unemployment is higher than when the policy was arrived at. I have been arguing and have had extensive correspondence with the chief executive of HMRC, who is a courteous and place-worthy lady, and the chief executive of VOA, but it is like arguing with a speak-your-weight machine. Their replies are about a policy that was forced on them when they took over their jobs. The correspondence has not been satisfactory, and their letters always end, “I hope you find this helpful.” Frankly, I do not, because they do not respond to my points. The policy is dictated by the need for economy and efficiency savings, but it will work against both because staff will not be more efficient after an hour-and-a-half drive to work, and it will not be economic to pay them £200,000 a year in travel expenses to do so.

The answer is not to take staff from Grimsby, but to transfer them to Grimsby. It is a good place to live and work. Office expenses are low, and rents per square foot are much lower than in the big centres where it is proposed staff should be transferred. Staff like being there, and do not want to leave. Why pursue at this late stage an expensive policy of concentration when staff who must be transferred could come to Grimsby, where office rents are lower, where staff can live more cheaply in the real world, and where they prefer to be? The problem with Grimsby is its name—I did not give it its name—and it is anything but grim as a place to live. That should be recognised, because people can live there more economically and have a more satisfactory life in a smaller urban centre than in a big city. It is time to reverse the priorities and to bring functions and staff to Grimsby, which is cheaper, instead of driving people out as a result of the policy of concentration in larger centres.

[The Exchequer Secretary to the Treasury (Mr David Gauke)]

It is a great pleasure to serve under your chairmanship again, Dr McCrea. I congratulate the hon. Member for Great Grimsby (Austin Mitchell) on securing this debate. I am pleased to have the opportunity to explain and to discuss the Government’s policy on people and estate issues, and its impact on public sector jobs in HMRC and the Valuation Office Agency in Grimsby.

I recognise and appreciate the hon. Gentleman’s passion for his constituency—perhaps we should all call it the promised land—and the fact that he wants to retain as many local services, jobs and employment opportunities for the area as possible. He set out with great knowledge and understanding some of the challenges facing Grimsby, because the private sector is not as strong as he and I would like it to be.

The issue before us is that the main department, HMRC, and its agency, VOA, like others, have been going through a transformation to ensure that they operate in the most efficient and cost-effective way. That process has been taking place for some years, and further efficiencies are required under the spending review settlement. For HMRC, that also provides for reinvestment of more than £900 million to combat tax avoidance, evasion and fraud in return for a reduction in the tax gap of £7 billion a year by 2014-15. That will lead to increased opportunities in enforcement and compliance, but by 2015 HMRC overall will be operating with around 13,000 fewer staff than in 2010.

For both organisations, having the right mix of people and skills in the right-sized teams and locations is important to ensure that they can deliver the services that their customers need. Balancing the need to retain a national network of offices with consistency across operations, while building capability to handle different areas of work, is core to maintaining customer service. Both HMRC and VOA have been carrying out good housekeeping of their estates for a number of years to utilise existing space to the maximum, and that has realised significant savings. For example, VOA has reduced its estate by 25%, saving in excess of £5 million in running costs a year since 2008. HMRC has made cumulative estate savings of £239 million since 2006.

The core efficiency agenda is key to deficit reduction, and managing Government property can contribute to that. The Government’s £370 billion estate costs around £25 billion per annum to run. The highly diverse estate has substantial scope for efficiency improvement, and the Government are the UK’s largest landowner and largest tenant, so it is important to achieve clarity on what is expected from property and how it is to be achieved.

The Government’s property unit leads the property strategy and is responsible for delivering the targeted savings, as well improving the building environment and promoting economic growth where possible. The decisions made by HMRC and VOA working together in a co-ordinated, cross-departmental way on their estates have identified savings to be made, as well as opportunities for work to remain in Grimsby. In December 2008, as part of HMRC’s earlier restructuring programme, the decision on HMRC’s offices in Grimsby was announced. It was decided to vacate Heritage house and retain Imperial house, the larger of the two offices. Heritage house is occupied by HMRC under a memorandum of terms of occupation with the VOA. The VOA now wishes to terminate that memorandum, and HMRC and the VOA will vacate the office by 31 March 2012. HMRC staff in Heritage house were informed of that decision on 24 March 2011.

The office closures will have an immediate impact on people in those locations, and I understand that that is a big concern for the hon. Gentleman. There are around 200 HMRC staff in Grimsby—15 at Heritage house and the remainder at Imperial house. As the hon. Gentleman has said, Imperial house has sufficient space to accommodate all HMRC staff when Heritage house is vacated. The vast majority of staff—167 people—work in the VAT directorate, and about 25 people work in the local compliance department. Local compliance work is being consolidated in Lincoln and Hull where there are established teams.

[Austin Mitchell]

The Minister has still not said why Heritage house is being disposed of. It is as if the place needs fumigating—there is a mass exodus. Staff from the VOA and HMRC are going, and those from the Crown Prosecution Service have fled to Hull. The building was designed to provide office accommodation for public administration staff. It is beautifully situated; there is parking; and there is a wonderful fish and chip shop nearby. Why the exodus from Heritage house? Why do the Government want to get rid of it?

[Mr Gauke]

The hon. Gentleman has described a somewhat idyllic scene for Heritage house, and the proximity of an excellent fish and chip shop cannot be entirely ignored. Nevertheless, HMRC has to find savings in its estate and, as the hon. Gentleman has pointed out, Imperial house has the capacity to take in additional staff. HMRC needs to find savings to be more efficient and to ensure that it is as effective as possible at collecting taxes. Together with the VOA, it has taken the view that Heritage house is surplus to requirements.

The long-term strategy for local compliance is to consolidate teams in fewer sites and place non-specific work in larger teams in urban centres. The local compliance department carries out a risk assessment of location specific work, and it assessed that there is no need for a longer-term compliance presence in Grimsby. It has stretching targets for performance improvement and must deliver those with a reduced work force. The aim is to achieve that by setting up co-located teams that will provide greater opportunity to share skills and experience. That has been happening for some years, and as a member of the Public Accounts Committee, the hon. Gentleman will be aware of recent improvements in the compliance yield obtained by HMRC.

There are similar issues for the 20 VOA staff located in Heritage house. The VOA is working towards having fewer locations nationally, each with a critical mass of staff to enable the sharing of knowledge and skills and improve efficiency. Discussions are taking place between VOA staff and their managers before a formal preference exercise in June. The consideration for HMRC is whether or not the 25 local compliance staff are able to travel to Lincoln or Hull, and they have been asked to express their favoured options by the end of May. The focus at present is on supporting HMRC and VOA staff through that change, while ensuring the continuity of service required for customers—the taxpayer or ratepayer—and in the case of VOA, delivery partners such as billing authorities.

HMRC and the VOA are seeking to avoid any job losses, and the staff consultation will enable them to explore all available options. HMRC staff unable to relocate to Lincoln or Hull will continue to undertake compliance-related work for the foreseeable future, based at Imperial house. No one who lives further away than a distance of reasonable daily travel will be forced to move. The 20 VOA staff, many of whom live in and cover properties in the Grimsby area, may be based elsewhere as a result of those decisions. It is not, however, uncommon for VOA property inspectors to start or end their day from home, if that is more effective and efficient. In addition, the VOA has made provision—subject to business need—for home working, which staff may opt for in the preference exercise. The local impacts of the change will be minimal.

The policy for both HMRC and the VOA is to avoid compulsory redundancies. They will do everything possible to help staff find a suitable role, which may be at the closest neighbouring offices or elsewhere. The VOA will continue to carry out property valuations and assessments locally, and many local staff will continue to carry out that work for Grimsby, so that local knowledge of the area and conditions will not be affected. The specific issue of ports will require specialist expertise, but it should not be disrupted by the changes.

Decisions to inspect specific properties or areas are not necessarily determined by the office location; understanding the area and having the right supporting information is key. In all cases, the decision to inspect a property or locality is made after other avenues have been exhausted and when the information required can be gleaned only by a visit.

The hon. Gentleman raised the issue of increased travel costs as a consequence of the changes. Travel costs may increase, but HMRC and the VOA believe that those increases will be significantly outweighed by savings on accommodation. The hon. Gentleman pointed out that costs are greater in Hull and Lincoln, but as far as the VOA is concerned, accommodation in those places is considerably cheaper than it is in Grimsby. The issue affects many areas, and I thank the hon. Gentleman for raising it today and defending the interests of his constituents with such passion. Nevertheless, HMRC and the VOA must make a contribution to clearing the fiscal deficit.

[Austin Mitchell]

This is the second survey that staff have received—the first must have been inconclusive. This time HMRC staff are not signing the option forms, because they feel that there are no alternative jobs in the tax system in north-east Lincolnshire or in other areas. The Minister has not answered the question about why jobs should not be transferred to Grimsby. It would be a cheaper centre from which to carry out non-locational work. If the work can be done from anywhere, why not Grimsby?