Amendment of the Law

Barry Gardiner Excerpts

Wednesday 21st March 2012 Commons Chamber

[Mr John Redwood (Wokingham) (Con)]

I fully support the Government’s aim. We need to earn our way out of the fiscal crisis, the massive over-borrowing and the large deficits. I also fully support their aim to get more money from taxing the rich, and we need a tax break for everybody else. We need a stimulus to demand and growth in this country and it is welcome that, given the difficult figures before the Chancellor today and the situation he inherited, he has managed to find a way of cutting tax for most people. That will be welcome relief from the relentless pressures on private budgets that hon. Members and their constituents have been experiencing as we try to climb out of the crisis.

It would be helpful to remind the House of the general shape of the five-year programme to try to get the deficit down. We want to get to a position in which we are adding less to the new borrowing. It is not that we are paying off the debt or dealing with the nation’s mortgage and credit card; we are just not flexing them quite as much as before. The Government have said that, over the five-year period of the planned coalition Government, they wish to increase current public spending by £90 billion and tax revenues by £174 billion a year by the fifth year of the programme, compared with the last Labour year. The House can see that, on most normal ways of looking at the situation, the plan is for the heavy lifting of getting the deficit down to be done by a very large increase in tax revenues.

Those tax revenues best roll in if the economy grows reasonably rapidly. The more quickly the economy grows, the easier and less hurtful it is to get money out of people; the less the economy grows, the more the choices become difficult.

[Barry Gardiner (Brent North) (Lab)]

The right hon. Gentleman says that the heavy lifting will be done by the rise in tax, but does he accept that there is a ratio of 4:1 in the amount that will come from cuts in public spending and benefits to the amount that will come from tax rises?

[Mr Redwood]

I have just given the figures—they are taken from past and current Red Books—and the hon. Gentleman must make his judgment. I am giving the House my interpretation. Most people who see spending going up by £90 billion and revenue going up by £174 billion will say that the increase in revenue is doing the job of bringing the deficit down. If he compares that with Labour’s plans for even bigger increases in public spending, he can make a case. He may also have in mind—we have debated this in the House before—whether the cuts are real or not. Some programmes will experience real cuts. We know that because there is a much slower rate of growth in cash spending than anything this country has been used to for a very long time.

If debt interest takes too much of the extra money, and if welfare benefits take too much, other things will obviously be squeezed more, which could lead to very unpleasant consequences. That is even more reason why the Government are right to try to get the deficit down, so that we do not keep on increasing the debt at such a huge rate, and why they are right to keep official interest rates low—that helps with the cost of the deficit. It is also why they are right that we need to earn our way out of the situation by getting many more people back into decent jobs, so that they are paid more in work than they are paid on benefit. Surely the whole House can agree on that and share that aspiration.

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[Barry Gardiner]

Does my right hon. Friend agree that one of the things that might look a little shakier later is the granny tax and the fact that 4.1 million people will be worse off in real terms, with an average loss of £83, and as a result of which 230,000 people will be brought into income tax?

[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.

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[Mr Bailey]

I am afraid I do not read comics such as The Dandy, and I have not come across any such predictions at all. I do not think that they are in the OBR’s projection, either.

From the moment the Chancellor came into office, he has ruled out any intelligent debate on the right balance of supply-side and demand-side measures that would achieve a level of economic growth that would eliminate the deficit and provide employment. When the Labour Government left office, the economy was growing, unemployment and inflation were falling and our public sector deficit was declining, but the Chancellor seemed to think that that was all wrong, and that the only recipe was austerity. His justification for that was the perceived threat that a credit rating agency would downgrade Britain’s triple A status, with all the horrors that that would entail. I congratulate the Chancellor on one thing: he has transformed credit rating agencies from being the most anonymous part of our financial services infrastructure into bedroom monsters that he conjures out of the wardrobe to frighten anyone who has the temerity to question the underlying philosophy behind the measures that he is taking. We have to suffer job losses, cuts to our public services and pay freezes, because if we do not, Moody’s and Fitch will get us. That is the Chancellor’s underlying approach.

[Barry Gardiner]

Could they possibly be the same Moody’s and Fitch that gave Lehman Brothers its triple A rating?

[Mr Bailey]

I think they probably were.

After we have endured two years of pain since the Government came into office, Moody’s and Fitch have rewarded the Chancellor for all his efforts by putting Britain’s triple A rating on negative outlook. The monsters have turned on their master. The pain has been in vain, and the Chancellor should acknowledge that and start genuinely to consider a more balanced approach that would enable us to implement the changes that we need to grow our way out of the deficit.

I remind Members that it was only last August when the Chancellor sneered at the American model and told us that the American economy was growing more slowly than Britain’s. Now, however, America has taken a balanced approach. Its economy grew 3% in the last quarter of 2011, and is predicted to grow further. Its deficit is predicted to drop next year, as is its unemployment. The fact is that the model that the Chancellor sneered at is actually delivering, while his is not. Last week, when I saw the Prime Minister having his cosy discussions with President Obama, I wondered whether he might have taken him aside and said, “Mr President, how is it that you have got your economic strategy so right and my Chancellor has got his so wrong?” But perhaps that was just a fantasy.

Parts of the Budget are good, and they might help, even though they deal with the supply side, when the demand side needs to be addressed. The national loan guarantee scheme is obviously a welcome measure, and some companies will benefit from it. However—this might be a good thing for those companies—some companies that use it would have invested anyway, while companies on the margins will not be able to access it: they will run up against the same problems as before. One cannot help but think that if more were done to inflate the economy and improve the demand side, more companies would become more viable in the future and more companies would be able to access the scheme.

The fact remains that while access to finance is still a barrier for many sound companies, this is not the only issue. Many companies are not going to the banks because their future market projections are such that they do not have enough confidence to invest any more. Although there has been a very modest improvement in business confidence, it is still very fragile overall, and this measure alone is not likely to counteract it.

The Institute for Fiscal Studies projections show that we are only a quarter of the way through the public sector cuts. If future public sector cuts designed to deliver on the Government’s objectives result in further unemployment, I foresee only a further squeeze on the financial situation of individuals and a further decline in the domestic market needed to give those companies the sort of confidence they need.

An earlier speaker mentioned the national insurance holiday that was introduced in a previous Budget. No mention of that whatever was made in this Budget; it has been a colossal flop. However, small businesses are campaigning up and down the country, arguing that if this were reshaped and if the money that has not been used were ploughed into it, all small businesses could qualify, provided that they employ more people. That would be a relatively minor tweaking to the Government’s Budget strategy, yet it could result in a significant increase in employment and a significant increase in demand. I am disappointed that the Government did not look at that.

On construction, much has been said about the national infrastructure plan. Fine, it is a great plan, but it is being projected as if having a plan results in delivery. So far, what has been conspicuously absent is any sort of funding mechanism to achieve this. We have heard about using pension funds, which may be a great idea, and we have heard about private investment, which may also be a great idea—we will see. The key point is that until there is a model for the financing of the delivery of these infrastructure plans, these are really pie-in-the-sky ideas. I have an uncomfortable feeling that these so-called plans are being used as a substitute for doing something.

The construction industry needs action on this level. Having enjoyed a revival in 2010 and early 2011—largely as a result of contracts initiated under the previous Labour Government—it is now shrinking. As of this moment, employment is predicted to drop by 45,000, with a further 3% in output in 2012. If the Government really want an infrastructure-led revival in our economy, they need to move quickly. We have the companies capable of delivering it, and we have the skills within those companies; what we need is Government action. Let me make one qualifying point. About 60% of the projects in the national infrastructure plan are based in London, but the greatest unemployment in the construction industry is outside in the regions, so the plan needs to be revamped to take that into consideration.

The Government are certainly making all the right noises about exports. What the Chancellor did not mention is that if we are to expand our exports to the BRIC countries—Brazil, Russia, India and China—reducing UK Trade & Investment’s budget by 17% is perhaps not the best way of doing it. Also, he did not mention that two of the most significant growing markets that we need to access, India and China—other Members have talked about this—are, as a result of the visa regime, hugely concerned about whether Britain is open to business. There is considerable evidence that that is damaging our economic relations with them.

My last point is very much a personal one. As a long-standing co-operator and as a believer in mutuality and employee share ownership, I believe that measures should be taken to foster and develop employee share ownership in this country. There is a huge body of evidence demonstrating that it leads to greater employee and consumer satisfaction, and greater productivity. The tax allowable savings rate for members who wish to invest in their companies has not been increased for donkey’s years. The Government have said that they will review it. Given the commitment made by both the Prime Minister and the Deputy Prime Minister, I would have wished for something a little more solid than that, and I hope that the review will deliver it.

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[Barry Gardiner (Brent North) (Lab)]

The trouble with Budgets is that they tend to operate on a five-year cycle that has no relation to the actual cycles of the resources that we profess to manage. The immediacy of the political triumphs over the requirements of the actual.

The focal point of this Budget is 2016-17, when the Government hope that the hole in the public finances will have been filled, but interestingly four fifths—more than £90 billion—of that filler comes from cuts in services and benefits, while only one fifth comes from rises in tax. Yet 73% of the tax rises have already been put in place, and less than 20% of the cuts in services and benefits have happened.

The Government might think it prudent to delay the pain, but Government Back Benchers might care to reflect on what that has done to their electoral prospects.

[Mr Robin Walker (Worcester) (Con)]

The hon. Gentleman mentions the figure of £90 billion, but will he acknowledge that the £36 billion reduction in interest payments, which we have already seen, makes a substantial contribution to that?

[Barry Gardiner]

The hon. Gentleman refers to interest payments, but he knows that on that score this Government are paying out £150 billion more than they predicted, so his argument does not hold up.

A Budget is a mechanism for the distribution and allocation of scarce resources, so let us examine what this Budget means for a child born today. A child born in my constituency today brings us this message: “By the time I reach my 18th birthday, the world will require 30% more fresh water, 45% more energy and 50% more food.” This child is part of the generation that will see the global population move from 7 billion to 10 billion people. How do we respond to this child? Do we become the most selfish generation of the most selfish species in our planet’s history? Or do we become the generation that understood that justice and sustainability are essentially the same thing? If you want peace in the world, create justice. If you want justice, live sustainably.

We must get away from both sides of the political divide arguing that they uniquely possess the key to growth. We listen to the stale arguments about whether more spending now will raise growth and reduce the deficit more quickly, or whether less borrowing now will ultimately be a surer path to bring our economy back into GDP growth. But what both sides are talking about is yesterday’s economics: Hayek pitted against Keynes.

The Chancellor wants to set markets free and insists that we cannot spend our way out of debt, but he wilfully ignores Hayek’s equal insistence that the boom gets started with an expansion of credit—the very liquidity that the Chancellor has told the banks they must provide for business. Hayek would have been appalled to find his theories invoked by a Chancellor literally printing money through quantitative easing. In Hayek’s view, that leads only to unrealistically low interest rates and to the cycle of boom and bust starting all over again.

Keynes of course believed in consumption-led growth as an economic stimulus, but he did not live in a world of 7 billion people. He assumed that growth was sustainable and natural resource was, for practical purposes, infinite. We know that it is not. As a result, we have an obligation to make sure that growth is sustainable, not simply to assume that it will be.

[Mr Jackson]

The hon. Gentleman is making a cogent and interesting argument. We all agree that we should give 0.7% of our GDP to international development. Surely he will concede that unless we grow our GDP, the absolute amount of cash that we have to give to good causes across the world, in supporting sustainability, will not be enough to do the things that he wants to do.

[Barry Gardiner]

The hon. Gentleman precisely misconstrues my point; the issue is not about the amount of aid given to developing countries, but about understanding the valuation of natural capital and incorporating that into the Government’s accounting framework. That is in the natural environment White Paper, if he cares to read it.

In a world of 7 billion people, growth can be sustainable only if it is predicated on advances that bring increased productivity and greater efficiency in the use of resources. That is what Hayek would have called a sound capital structure and proper allocation of capital. For the world to continue to achieve a 3% per annum growth target, and to maintain a trajectory that keeps carbon emissions below the 2°C threshold of dangerous climate change, we must increase our productivity per tonne of carbon emitted 15 times over.

The Budget simply does not address that technological challenge. It was extraordinary to see the Secretary of State for Energy and Climate Change join forces with the Treasury last Friday evening and issue a press release at 6 pm, embargoed until midnight, to exempt gas-fired power stations from the emissions controls set out in the fourth carbon budget by the Committee on Climate Change. Those emissions reductions were, in the Committee’s view, part of the necessary regulatory framework for achieving our target of at least 80% emissions reductions by 2050.

The press release set out no alternative mechanisms that would be adopted to keep to those targets and no Minister has sought to expand on the issue since last week. It is a measure of the shame that the Government felt on reneging on the fourth carbon budget that they issued their press release in such a furtive manner. What is worse, what happened shows that the new Energy Secretary has no command over his brief and has been fingered by the Treasury as a weak Secretary of State.

Since William Ewart Gladstone instituted the modern accounting and budgetary processes of the House of Commons 150 years ago, modern economics has come a long way in its understanding of capital. In Gladstone’s day, the notion of capital was very simple; it represented money and machinery. Gradually, we have come to realise that capital is not just money and plant. We have developed sophisticated concepts of social and intellectual capital. We know that a well functioning legal system is very much a part of the wealth of a society, inviting commerce and trade to practise where certainty and redress prevail. That is certainly a form of capital different from a bridge, printing press or motorway, but we now measure them all in our assessment of the national wealth of a country.

Resource economists now point out that we have left out of our economic calculations perhaps the most important capital of all: natural capital. We have left it out for a very simple reason—we always took it for granted. We thought that it was a free good. It cost us nothing and we assumed the supply was infinite. In the language of classical economics, natural capital was a mere externality, “as free as the air you breathe”.

What we have now begun to realise is that the air we breathe is not actually free—at least, it is not without a quantifiable value. Any sound cost-benefit analysis of public policy must take that value into account. The Environmental Audit Committee report on air pollution estimated that the costs from air pollution are up to £20.2 billion. That is the cost of respiratory and other diseases associated with poor air quality, both in treatment and lost productivity.

The natural environment provides not just a physical stock of resources—forests and fish, minerals and fresh water that human beings depend on—but a network of services essential for human life. The pollination of our crops by insects, the stabilisation of our soil by trees and the regulation of our watershed by peat bogs are just some of the ecosystem services that a new economic model must begin to incorporate into our Government’s accounting framework. That new accounting renders inadequate the concept of GDP growth because it reveals one of the central conundrums of classical economics: that a country can become poorer while increasing its GDP.

The Chancellor said nothing today that showed that he understood that. Another important consideration is that those wider benefits, although immensely valuable, do not accrue to an individual private property owner; they are experienced by a community at large. They are regarded as free goods by the wider community, and in classical economics as externalities, and because they are not directly captured by a landowner they rarely feature in a landowner’s decision on how or whether to dispose of them. That is why the exercise of private property rights can often be to the public detriment. It is also why the role of the state in regulating the disposal of land is so important. Today we have heard much talk of stamp duty and how to raise revenue from the rich. It therefore seems quaint that no one has commented on the fact that the land registry for England, which was established in 1928, still accounts for only some 64% of the land in England, while in the registry for Scotland the figure drops to a mere 21%.

Of course, there is a reason why almost a century later we have not yet been able properly to map the title of land in the UK—it is that so much of it has never been sold but has been passed down in families, from parent to child, in enormous estates. If the Government genuinely want to raise tax from the very wealthy, they should examine not only houses sold for over £2 million but the vast tracts of our country that have been accumulated in great estates for centuries and are still owned and managed not for the benefit of the population at large but to maximise the income and pleasure of a very few private individuals. I do not claim that all hereditary estates are badly managed in respect of the environment, but I do claim that good management comes not only as a result of inheritance. Land tax reform is long overdue. If we wish to become a more equal society, then we need to consider the taxation of land and land use in different and more imaginative ways, for the benefit of society as a whole.

The Chancellor sought in his Budget to bury another important piece of environmental news. Next Tuesday, the new national planning policy framework is published. That deserves our attention not least because we know that the Chancellor takes the view that the planning system is a blockage to economic growth. The NPPF will cause havoc up and down the country as planning uncertainty and ambiguity filters down to local communities. Fundamental to the new framework is the presumption in favour of sustainable development. In practice, this means—

[Mr Deputy Speaker (Mr Nigel Evans)]

Order.

Autumn Statement

Barry Gardiner Excerpts

Tuesday 29th November 2011 Commons Chamber

[Mr Osborne]

I had the opportunity yesterday, with my hon. Friend and the Mayor of London, to visit one of the development sites between Nine Elms and Battersea. It is fantastic to see that project going ahead and I hope that the support and commitment we are giving to help with the borrowing required to fund the Northern line extension will help to create 25,000 jobs in that area of London.

[Barry Gardiner (Brent North) (Lab)]

The £5 billion programme of capital infrastructure is to be welcomed. What is not to be welcomed is that it will be paid for out of the pay packets of individuals in both the private and public sectors. Last year the Chancellor said that he believed that the British public were able to spend their money better than the British Government. When did he stop believing that?

[Mr Osborne]

Perhaps I can explain to the hon. Gentleman that taxes come from people working in the public and private sectors. Money spent on infrastructure is well spent. For every £1 spent on infrastructure we have made savings in current spending, so we are not adding to borrowing in order to fund it. It will help to create jobs and support the economy.

Eurozone Crisis

Barry Gardiner Excerpts

Thursday 3rd November 2011 Commons Chamber

[Mr Hoban]

My hon. Friend is absolutely right. Fiscally prudent policies that tackle the deficit and get interest rates lower must be implemented across the eurozone, so countries enable their economies to grow.

[Barry Gardiner (Brent North) (Lab)]

British banks are responding to the increased instability not only by tightening controls, but by tightening credit. How will the Government respond to the reduction in liquidity being made available to British business and ensure that firms are able to borrow and flourish?

[Mr Hoban]

As I said, British banks are better placed as a consequence of measures taken to strengthen their capital and improve their holdings of high-quality liquidity. We have also agreed lending commitments with Britain’s major banks through Project Merlin, and the Chancellor has said he will announce further measures to improve the availability of credit in the autumn statement.

Independent Banking Commission Report

Barry Gardiner Excerpts

Monday 12th September 2011 Commons Chamber

[Mr Osborne]

Of course, that is the difficult balance that we all must get right. The challenge is to ensure that banks can lend well, as people have been asking them to, while at the same time ensuring that they have a greater cushion should things go wrong. In his report, one of the things that John Vickers points to is that if a bank is ring-fenced, its retail deposits are more likely to be used to support retail lending than to support an investment bank’s activities. He thinks that the ring fence could positively enhance lending opportunities for ring-fenced banks.

[Barry Gardiner (Brent North) (Lab)]

Given that Northern Rock had no investment arm and Lehmans had no retail arm, does the Chancellor have any sympathy with the view that ring-fencing will add little over the proper capital requirements and ethical investment decisions that Vickers calls for, save for £6 billion additional cost to the UK economy?

[Mr Osborne]

The short answer is no, I do not. On pages 31, 32 and 33, the report of John Vickers and his commission goes through how the reforms would have improved the situation regarding Northern Rock, Lehman Brothers, RBS and HBOS. We must remember that the reforms are in the round. I have been asked a lot about ring-fencing and retail lending, but there are also higher capital requirements, and a requirement for a loss-absorbing cushion for bondholders. Those changes would also have helped with Northern Rock. On top of that, the new regulatory regime would, I hope, have exercised more judgment.

Of course, the ring-fencing idea, which is just one of the four or five major recommendations, is only really relevant to universal banks. The only universal bank listed by the hon. Gentleman that went wrong is RBS. As is clear from the memoirs of the former Chancellor, ring-fencing would have helped enormously to resolve the problems of a very complex universal bank without the need for recourse to the taxpayer.

Finance Bill

Barry Gardiner Excerpts

Tuesday 28th June 2011 Commons Chamber

[Barry Gardiner (Brent North) (Lab)]

Can the hon. Gentleman explain why the individual making the payment should not make it out of resources provided by another person for the purpose of enabling it to be made? If he can explain that, does he not believe that it would require a desperately intrusive large state to undertake investigations to ensure that the provisions in the new clause were adhered to?

[Mr Chope]

The new clauses being considered together are a word-for-word recital of the original legislation. The hon. Gentleman may have some good points, but I hope that those will not be taken by the Minister, because they would be points against the measures that followed the 1990 Budget.

[Barry Gardiner]

I am grateful to the hon. Gentleman for giving way again. I am simply trying to establish the extent of Government intrusion that would be required in order to enforce the clauses that he supports. The Government would have to intervene and find out whether the funds being made available for the premium had been supplied by a third party—perhaps children who wanted to help their ageing parents. How would the restriction be enforced?

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[Frank Dobson]

When I was Health Secretary, I agreed to the establishment of national health service units that undertook diagnostic and straightforward treatment on straightforward conditions. I thought that it was a sensible idea, but unfortunately my successors decided to privatise it, and it has to be said that then, John, now Lord, Hutton was not good at getting bargains for the taxpayer. He agreed a scheme whereby on average the private sector was paid 11% more per operation than the national health service, and the private providers were also paid when they did not do all the operations that they were contracted to do. Some got 11% more for operations that were not actually carried out, so I am no fan of such arrangements, but, having opposed them right from the start, I do not recall any cries of “Hosanna!” from the Tory party when I attacked the proposition. My memory may be false, but the Tories seemed to be wild enthusiasts for that ridiculous scheme.

Noticeably, however, unlike putting money into the private sector or, in the case before us, a bit more money into the hands of pensioners who have quite a bit to start off with, investing in the national health service had a dramatic effect. When we took office, national health service hospitals performed 5.7 million operations a year; in the most recent year for which figures are available, they performed 9.6 million. If we want to look after the interests of people who get sick, we will find that the way to do so is to ensure that everyone has access to a massive increase in the number and quality of operations, and there has been a massive increase in both.

[Barry Gardiner]

When considering the situation in 1990, does my right hon. Friend recall that part of the rationale for those people having private health care was that the queues in the health service were so long that it was effectively a way of getting the same care and the same consultant but doing so in the private sector much faster? Does he share my fear that the reason why the proposal is being made now is that Tory Back Benchers know that waiting lists are already going up and will go up still further, so they want to give their friends exactly the same opportunity?

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[Mr Jones]

It is. To be fair to the hon. Member for Gainsborough, he did say that being a lone parent does not make someone a bad or unfit parent. My hon. Friend the Member for Denton and Reddish (Andrew Gwynne) had three children before he got married, but that does not make him a bad parent. [Interruption.] He says, “I don’t know,” but I do not think it makes him a bad parent: it is something that he and his partner chose to do. As he said earlier, the offer of a tax break of £150 a year would not make any difference to whether people decide to have children before or after they marry. Indeed, I have many friends who have children and who have never married and have no intention of doing so.

[Barry Gardiner]

Has my hon. Friend considered the situation of people like my mother whose husband, my father, died when I was a child? Under the proposed system, she would have found that the support was taken away at the very time when financially she needed it most. That would be the effect of the measure, which pays no real attention to the needs of the family or the needs of the child.

[Mr Jones]

My hon. Friend makes a very good point. The proposal is not subtle at all and his personal example is a good one. Why should someone who loses a spouse in an accident or through natural causes be penalised because, through no fault of their own, they have lost their spouse? That is the problem with trying to use tax in relation to marriage. As I have said, the measure is very different from what was put forward in the Conservative manifesto because it does not include civil partnerships. It clearly is not what Conservative Back Benchers have read in their own manifesto.

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[Mr Jones]

There is, but the new clause that we are debating—I do not know whether the hon. Member for Peterborough would agree with this—refers only to married couples; it does not refer to civil partnerships, for example. I know that the new Conservative party is supposed to be modern and reflective, but what about people in a civil partnership who have children, whether from previous marriages or afterwards? Are we saying that that is a worse family unit than marriage? This debate is not about the tax system for those who are married and those who are not; it is about what is in the best interests of the child. Single parents—they may be separated, or their partner or spouse may have died, as my hon. Friend the Member for Brent North (Barry Gardiner) said—work very hard. This is about the child. The problem with the proposal is that it would reward people with no children.

[Barry Gardiner]

Does my hon. Friend accept that he has perhaps calumniated Georgian England—inadvertently, I am sure? Does he accept the wisdom of Jane Austen, who of course said:

“It is a truth universally acknowledged, that a single man in possession of a good fortune”

of £5,000 a year

“must be in want of a wife”?

My hon. Friend’s suggestion that marriage was not as common in Georgian England as in Victorian England is somewhat belied by Austen and other authors of the age.

[Mr Jones]

Let us consider Georgian and Victorian England. It might have been fashionable for someone with £5,000 a year in Georgian England to be married, but in many post-industrial cities of northern—

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[Barry Gardiner]

I notice from the amendment paper that new clause 5 is in the hon. Lady’s name. Could she explain to the House why she did not move it?

[Fiona Bruce]

My hon. Friend the Member for Gainsborough (Mr Leigh) kindly moved it in my stead.

Is it fair—

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[Jim Shannon]

The evidence from the constituency that I represent would indicate that that is not necessarily the case. Those who are perhaps worse off financially are in stable relationships as well. The reason I am speaking on this issue tonight is that I am reflecting not only my personal views, but—I believe—those of a large majority of the people whom I represent. I am here as the MP for Strangford to put that on the record and ensure that that opinion is well heard this evening. Many people might not like what I have to say, but hon. Members will have to accept that it is my opinion.

[Barry Gardiner]

I, too, believe that marriage is good for society, but surely what we have to consider this evening is whether the proposals before us would do anything to incentivise marriage and increase the number of people going into wedlock, and I do not believe for a moment that they will.

[Jim Shannon]

I do not believe that that is the intention of those who have put these proposals forward. I believe that they are about the unfairness in the taxation system that impacts directly on those in marital relationships. That is the reason. This is not about creating a financial incentive—other Members have suggested that it is about encouraging people to get married for an extra £150—and I do not believe for a second that it is.

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[Jim Shannon]

I thank the hon. Gentleman for his intervention. Clearly that is the issue, because there are many countries right across the world that have tax breaks. Indeed, the Prime Minister has said:

“Britain is almost the only country in Europe that doesn’t recognise marriage in the tax system.”

That was his comment back in 2007, but he reiterated the point in 2008 and 2010. There is clearly an issue to be addressed if we are to make comparisons with tax systems in other countries across Europe.

[Barry Gardiner]

I am grateful to the hon. Gentleman for giving way again; he is being extremely generous. I am delighted that he believes that this should not be about incentivising—[Interruption.]

[Mr Deputy Speaker (Mr Nigel Evans)]

Order. Please could the hon. Gentleman direct his comments through the Chair? That will also mean that I can hear what he is saying.

[Barry Gardiner]

My apologies, Mr Deputy Speaker.

I am delighted that the hon. Gentleman has said that this measure is not about incentivising marriage, or about penalising people. Can he therefore explain why, under the proposals, a woman with children who has recently been widowed would suffer a financial loss at precisely the time when the family needed the money the most? That seems to me to be a fundamental flaw in the proposals.

[Jim Shannon]

The hon. Gentleman made that comment earlier to other speakers, and they responded to it. I accept that there are anomalies in all systems. In the short time that I have been in the House, I have spoken on many issues, and each one was something that my constituents told me that they wanted me to deal with. I am on record as having opposed changes to the education maintenance allowance, the employment and support allowance and incapacity benefit. I am also on record as opposing changes to the disability living allowance, among other changes in the benefit system. I have done that in this Chamber; if I see something wrong, I will take a stand on it. If I see an anomaly, I will do my best to address it. I cannot necessarily tell the House every detail of the matter, because I might not be aware of them, but if there is a wrong, it must be righted.

The Economy

Barry Gardiner Excerpts

Wednesday 22nd June 2011 Commons Chamber

[Ed Balls]

No, no, no.

A year ago, we had a balanced plan: people paid their fair share, there were spending cuts and there were tax rises, but it was cautious and was not a pre-ordained political timetable or a headlong lunge. That is what the Chancellor should be doing now. He should be adopting a more sensible approach to deficit reduction, which would allow him temporarily to reverse the VAT change right now. He should also reopen the spending review and have a steady approach to spending cuts. A 20% cut in police budgets, front-loaded, is complete criminal justice madness. He should take up our plan to repeat the bank bonus tax, build houses and get young people back to work. As I have said, a temporary VAT cut now would put money into people’s pockets, boost confidence, push inflation down and give our flatlining economy the jump-start it urgently needs. That would be a better way of getting the deficit down.

[Barry Gardiner (Brent North) (Lab)]

My right hon. Friend will know that the UK taxpayer will still be contributing to any bail-out of Greece through the International Monetary Fund, but will he comment on the fact that if Greece does fail and subsequently other countries follow that failure into default, that could precipitate the end of the IMF? The loans that the UK taxpayer is making to the IMF would then never be repatriated.

[Ed Balls]

The IMF is there to help countries through situations like this. We are a shareholder and a contributor to the IMF and that is quite right. It is a different matter our putting liquidity money into a eurozone strategy that patently is not working because it is flawed. My argument to the Chancellor is that it is ironic to see a British Conservative Chancellor backing the German Finance Ministry’s view over sanity and common sense. We have not seen that in our country for a very long time.

--- Later in debate ---

[Mr Osborne]

The hon. Gentleman should get better handouts if he is one of the shadow Chancellor’s close advisers. [Hon. Members: “Answer the question.”] I have answered the question. At the 2005 general election, we fought against Labour’s spending plans. In 2008, the year that he mentions, we came off Labour’s spending plans. Thank God that we did, because it has given us the mandate and the power to put the public finances back on track.

The extraordinary thing about the shadow Chancellor is that he takes credit for the things that went right. On Bank of England independence, he has completely written out of the script the then Prime Minister and Chancellor. He now takes sole credit for keeping Britain out of the euro, although, as far as I am aware—I am happy to take an intervention—the Labour party’s official policy is still that we join the euro in principle. Is that right? I do not know whether the policy has changed. [Interruption.] We have heard quite a lot from the Labour party in the past couple of hours about being on top of the detail. Surely, the shadow Chancellor knows what his party’s policy is on the euro. [Hon. Members: “He doesn’t.”] Oh, dear. Let me give him a clue. When I became Chancellor, I had to close down the euro preparations unit in the Treasury.

Of course, the shadow Chancellor takes credit, but he is nowhere to be seen when the discussion turns to the fiddled fiscal rules, the failed tripartite regulation, the doubling of the debt, the bank collapses and the destruction of our pensions—none of those things has anything to do with him at all. Now, he is at it again. This is what a member of the shadow Cabinet said a couple of weeks ago:

“he increasingly thinks his party is heading for the buffers and doesn’t want to be in the cab when the collision comes.”

His boss was called Macavity, and it turns out that Macavity has a kitten—son of Macavity. There is a reason for all this: because he cannot construct a credible story about the past that does not cast himself as a villain, he lunges forward in opposition from one incredible uncosted policy to another.

[Barry Gardiner (Brent North) (Lab)]

Will the Chancellor give way?

[Mr Osborne]

I will take interventions, but let me make this point.

Since this is an Opposition day, let us examine the latest idea of a £51 billion—£13 billion a year—unfunded commitment on tax. This means that the shadow Chancellor has presumably abandoned the Darling plan for this year, because the commitment was not funded in that plan, and that members of the Opposition Front-Bench team were not only too embarrassed to mention it at Treasury questions yesterday but, as we now know, they were not consulted. The shadow Cabinet was not consulted.

I will give way on this point. On television at lunchtime, the previous Chancellor of the Exchequer, the right hon. Member for Edinburgh South West (Mr Darling), was asked eight times whether he supported the policy of the shadow Chancellor and he did not give an answer. Perhaps the shadow Chancellor will tell us whether the last Labour Chancellor of the Exchequer supports his plan—yes or no.

--- Later in debate ---

[Mr Osborne]

I give way to the former forestry tsar.

[Barry Gardiner]

The right hon. Gentleman will recall that a year ago the predictions in terms of unemployment did not reflect the 510,000 new jobs which he boasted at the Dispatch Box today about having created in the economy. He will also remember that the OBR predicted 2.6% growth, which has not happened. How does he account for the fact that, despite the 500,000 extra jobs in the economy, growth has flatlined and the 2.6% growth predicted has not been achieved?

[Mr Osborne]

The hon. Gentleman draws attention to the 520,000 net private sector jobs that are being created. It is also the case, as we saw yesterday, that the tax receipts have not only held up, but are ahead of forecast. The IMF said that an interesting question arises when that is put alongside the GDP figures. These forecasts are independent. That is one of the fundamental changes that we made. The Office for Budget Responsibility is independent. It is also a central forecast, rather than a cautious forecast, as used to be the case. That was another important change we made. We shall see as the economic data come in. We should welcome the public finance data last week and we should certainly welcome the unemployment data.

I give way to my constituency neighbour.

Finance (No. 3) Bill

Barry Gardiner Excerpts

Tuesday 3rd May 2011 Commons Chamber

[Chris Leslie]

Indeed. Were it possible under the rules of order for the Opposition to table an amendment to increase the bank levy rate, we probably would have done so. However, we were unable to do so because of the slightly arcane rules of order. We need to examine the rationale behind the rate chosen by the Minister and understand why the Government moved from a threshold approach to triggering the bank levy, to a tax-free allowance of a certain amount before which banks would pay against the chargeable liabilities of the bank levy.

We also need to understand whether the bank levy is, as my hon. Friend suggests, an adequate step when considered in the context of the wider economy and public finances. Ultimately, we need to understand whether the Treasury is being straight with the public and honest about the taxes that the banks will pay over the years ahead. We have debated the Government’s approach to the banking sector before, and we look forward to the final report of the Vickers commission on the state of competition and regulation of the banks so that never again can these institutions take such extreme risks and gambles that land in the lap of the taxpayer when the going gets tough, as they did before the credit crunch.

[Barry Gardiner (Brent North) (Lab)]

The Government are seeking to take £2.5 billion in revenue from the tax that they have imposed, but has my hon. Friend assessed the corporation tax reductions that the banks will experience, which are thought to be £100 million this year? Has he projected the figure by the end of the Parliament? Can we arrive at a net figure to see the real impact of the Government’s policy?

[Chris Leslie]

My hon. Friend makes an extremely prescient intervention, because the Chancellor, under pressure from the Opposition, had to cave in to a concession on corporation tax in the March Budget. The Government announced the bank levy last June, so we knew that they would be introducing this tax, yet the corporation tax cuts will clearly benefit the banks significantly. The Treasury claims that in the March Budget it offset the benefit that the banks will apparently get as a result of the reduction in corporation tax rates, but we will have to wait to see whether the slight increase in the bank levy—around £100 million—introduced in the Budget will be sufficient to offset the full corporation tax cuts that the banks will enjoy over the lifetime of this Parliament. I recall that the written answer to a question I tabled on the predicted benefits to the banks of the corporation tax reductions suggested that that would be about £100 million in year one, £200 million in year two, £300 million in year three, and so on, but that largely reflects the reductions in corporation tax rates. That is something of a moot point, because we contend that the design of the bank levy is insufficient. Today’s debate should provide an opportunity to seek proper redress for the crisis and ensure that we put the banks on a fair tax basis, but that is not what the Government are seeking with this pathetically small bank levy proposal.

--- Later in debate ---

[Chris Leslie]

My hon. Friend is entirely right, and that is why we have to take a step back and look at the context of today’s debate. The Government are clearly still on the side of the big banks at a time not just when the living standards and wages of ordinary people are being frozen or reduced, but when vital public services are being slashed. Indeed, it is worth reminding ourselves of the consequences of the cuts that the Government are pursuing.

Teaching assistants, youth workers, library staff and lollipop ladies are being made redundant; binmen, street cleaners, environmental health officers and park keepers are disappearing from our neighbourhoods; police detectives, forensic scientists, 999 operatives and police community support officers are no longer affordable in the fight against crime; and hospital cleaners, nurses, paramedics and ward clerks are having their posts eradicated when the NHS needs them more than ever. How dare Ministers say that we are all in this together when they take such a weak and feeble approach to the banks.

[Barry Gardiner]

My hon. Friend seeks to use an argument based on contrast, but there is also an argument based on causality. In his remarks, it has to be made clear that the causal relationship between the misery that some people will suffer over the next few years and the actions of some bankers is very real. There is real disquiet in the House about the Government’s proposal not just because some people are doing well and some are doing less well, but because, given that contrast, there is a causal relationship for those people doing badly.

[Chris Leslie]

Absolutely, and, as we have heard time and again, Government Members clearly do not understand the causes of the deficit, so they are not the right people to solve it. If they understood and acknowledged that the banks played a significant role in causing the deficit, maybe—just maybe—we would take up their suggestions on how we go forward, but they choose to ignore the role that the banks played—[Laughter.] If the hon. Members for Chippenham (Duncan Hames) and for St Austell and Newquay (Stephen Gilbert) think that the banks did not play a role in the deficit, we will all be interested to hear from them, but surely they have to acknowledge that point.

The bonus pools and pots continue to be significant, however, and some bankers receive obscene, life-changing sums of money, so we do not really need to worry too much about poor banking executives; we should worry about those who depend on vital services but will now go without as a result of Ministers’ choices.

--- Later in debate ---

[Chris Leslie]

May I make a little progress? Time is short.

As a result of European Union reforms championed by Labour Members of the European Parliament who tried their best to restrain some of the excess, some bank bonuses must now be deferred and given in the form of shares. Bankers cannot take them in cash immediately. However, the Minister needs to explain why he is counteracting those bonus deferral arrangements by introducing a loophole in new section 554H, in schedule 2, allowing a concession to bankers whose bonuses are paid largely in the form of shares rather than cash. Rather than having to pay the tax at the point at which the bonus is awarded, they will need only to pay it on a date down the line when the shares are sold, possibly avoiding the current 50p rate of tax. The Sunday Times wrote about that last weekend. There is speculation that the Chancellor will cut the 50p rate at some point, and that, as a result of the Minister’s reforms, bankers will be allowed to wait and to avoid it. Can the Minister explain why he has made that valuable concession?

[Barry Gardiner]

Will my hon. Friend clarify the chronology? Subsection (1)(d) of new section 554H states that the section applies if

“the vesting date is not more than five years after the award date”.

Does he believe that the Government are certain to reduce the 50p rate within the lifetime of this Parliament?

[Chris Leslie]

I do not know whether we have to hope that the Liberal Democrats will take strong action before that moment comes—I do not know whether that is an oxymoron—but the Government have dangled the prospect of a tax cut for only the very richest people. It is interesting that they are designing the Bill’s provisions to allow the potential avoidance of the 50p rate following what I considered to be a fairly positive change at European level to defer bonuses in an attempt to discourage short-term high-risk activities.

--- Later in debate ---

[Mr Redwood]

The Front-Bench team and I were at one on this issue: we were saying that what was needed were better regulation and less regulation. The Government were regulating too many things badly. As I have just explained, they were regulating mortgage banks in a way that allowed all, or at least several, of them to be crippled and caused a great many problems. The hon. Gentleman is quite wrong about Baroness Thatcher: much stricter controls over cash and capital were imposed throughout her period in office, and, of course, no major bank went down during that period. The same cannot be said of 2007-10, when the requirements were much laxer, as I highlighted in the report, and when we ended up with banks going down.

We are not here to debate past regulation, however; we are here to debate taxation. My purpose in sketching the history of this tragic situation is to express solidarity with all those who agree with the public mood, which is that we want to get a bigger return out of the banks, whatever we may think are the reasons why they are in their present position, but it is also to remind the House of a very important and salient fact, which is that two of the biggest banks are wholly or partially in state ownership or control. We are therefore talking about taxing ourselves in no small measure.

The issue before Ministers is a little more complicated than the Labour spokesman has suggested, because there are two ways in which we can get cash out of the banks: one is to tax them now on their stream of revenue, or their assets and liabilities in the case of the bank levy tax; the other is to move more quickly to sell off those assets back into private sector ownership and, I hope, proper private sector risk taking. If we are to get the maximum receipt, we do not want to be taking too much money out of the banks in the short term by way of taxation, because for every £1 of tax we take out of them, we lose £5, £10 or £15, depending on the multiple we sell them on when we come to sell them.

[Barry Gardiner]

The right hon. Gentleman is making a very coherent presentation, but does he not agree that if we do not want to be taking money out of the banks by taxing them, equally we do not want to see that money going out of the banks by way of bonuses paid to their high-end staff?

[Mr Redwood]

I hasten to correct the hon. Gentleman: of course I think we have to tax banks. We have to tax ourselves, and we need to tax the other banks in the system, as well as the state-owned ones, but we must also consider the balance of effects and the impact on shareholder value. I entirely agree with those who say that if a bank is state subsidised or largely state owned and is therefore in receipt of state money, it is surprising that it should be paying very large bonuses. It is even more surprising if the bank is loss-making, because although an individual employee in that bank may be able to say, “I personally made a profit to offset some of the losses,” the senior people in the bank are corporately responsible for the overall results. It is at the very least surprising if a loss-making bank is making rather big pay-outs, because that is taxpayers’ money and taxpayers’ wealth being paid out to those individuals, which, as the hon. Gentleman rightly says, is not then available to sell as a stream of profits when the shares are returned to the private sector.

--- Later in debate ---

[Ian Lavery (Wansbeck) (Lab)]

The general public are outraged at the levels of bankers’ bonuses, which remain very high indeed. The Government were forced, as we are all aware, into multi-billion pound bank bail-outs during the financial crisis. Quite simply, people cannot understand why bankers and people employed in the financial institutions have been given billions and billions of pounds of taxpayers’ money at a time of great austerity.

To pay massive bonuses in the midst of a financial crisis is a national disgrace, as it is to pay massive bonuses at a time when public sector services are being destroyed and young people face an unprecedented attack via tuition fees, the abolition of the education maintenance allowance and changes in Sure Start. Last year, Barclays boss Bob Diamond and his two replacements at the head of the investment bank were paid an obscene amount of money: £28 million. The trio also received shares worth £40 million for past performance. That must have been some performance!

I have just done some calculations. The people who are now receiving redundancy notices in the public services—many council workers, nurses, doctors, police officers and the rest—would be lucky to have a bonus of £50 a week. That is £2,500 a year, £25,000 over 10 years and £125,000 over 100 years. So to make £1 million, they would have to live until they were 400. To make the £28 million that the Barclays heads were given, they would have to live to 11,200. That is highly unlikely—I am merely accentuating the point—but those figures are an absolute disgrace.

[Barry Gardiner]

I do not wish to disturb my hon. Friend’s flow, but is he aware that I was informed by the Independent Parliamentary Standards Authority the other day that I could not raise any of my staff’s salaries, even though they have been the same for a year, because they are public servants? If I wanted to give them any reward for exceptional service, the maximum I was allowed to give was a £15 token each year for a meal. Where can anyone get a meal for £15 around here? It is absolutely disgraceful, when such sums are being given out to the bankers.

[Ian Lavery]

I thank my hon. Friend for that question, which is a great way of introducing IPSA into the debate on the Finance Bill. I think we would have agreement on that point across the House.

Let me get back to the discussion. Barclays bosses were compared to Somali pirates by one of their own shareholders, amid anger over their obscene bonuses. Shareholders lined up to vent their fury at the annual meeting, complaining that their dividends had plummeted while senior executives continued to enjoy huge pay packets. Another shareholder accused the executives of rank historical folly, saying:

“In these times of austerity the seemingly excessive payments to senior bank staff seems to show the lack of wisdom reminiscent of Marie Antoinette saying let them eat cake.”

HSBC has tried to seize the high ground by announcing a reduction in maximum bonuses for top bosses, but chief executives could still receive a package of more than £12.5 million this year. This mammoth pay deal comprises a salary of £1.25 million plus up to £7.5 million in long-term bonus shares and a possible £3.75 million annual bonus. Some reduction. That is why the bankers must pay their share, and why the Labour party are seeking this amendment to ensure that that happens.

This recession was not made in Britain; it is a global recession. Let me set the scene for a minute or so. In the decade before the financial crisis, Labour cut Britain’s national debt and Britain’s deficit. Both were lower than the amounts we inherited from the Tories. Before the financial crash we had a lower national debt than America, France, Germany or Japan. The crisis was caused by the financial institutions—by these banks. Governments and central banks were also, of course, at fault, including in Britain, where we did not see it coming and should have been tougher in regulating the banks.

The cry from those on the Conservative Benches, and from the City, for lighter regulation of the banks should have been totally ignored—and, yes, Labour should have been tougher on the banks. When the City and the Tories called for lighter regulation, we should have ignored them and been tougher still. Our priority, however, was to prevent recession turning into depression and to keep people in jobs. We always said that once the economy was growing strongly, tough decisions would be needed to get the deficit down again. The plan, as we all know, was to halve the deficit in four years, including through a continuation of Labour’s bank bonus tax.

The crisis was not the result of our spending on essential front-line services such as the NHS, schools, police, local authorities or any other public service.

--- Later in debate ---

[Stella Creasy]

My hon. Friend hits the nail on the head, because proposed paragraph (b) of amendment 9 talks about wider reform of our banking system. Many Opposition Members have called for action on access to affordable credit, but this is not just about credit unions; it is about the schemes that housing associations have put forward. In that context, I register my disgust at the fact that a housing association was recently taken to the Advertising Standards Authority by The Money Shop for daring to point out to their tenants the cost of borrowing from such companies—and was, indeed, censured.

The question of how we deal with banking reform, so that everybody can access affordable credit and there is not a new dividing line in our communities between those who can get on in life and families who are scarred with debt for generations, is a key concern for me, and many Opposition Members are concerned about what the Bill and the amendments can do to promote such measures.

[Barry Gardiner]

I welcome all the energy and work that my hon. Friend has put into that subject. Does she share my disgust at the fact that, here we are, debating an issue that affects literally hundreds of thousands of our constituents and, in terms of bankers' bonuses, dealing with one of the biggest issues before the public, yet there are precisely two people sitting on the Conservative Benches?

[Stella Creasy]

My hon. Friend makes a good point about the importance of this Bill putting first the needs of this country and, therefore, about the importance that others attach to it. I hope that we have support from members in all parts of the House for the need to act on the high-cost credit market. There has certainly been support among Government Back Benchers; noticeably, however, Government Front Benchers have so far reacted with negativity to that support. I hope that they will change their minds, given the possibilities that we have through the Bill, the amendment and, indeed, the regulatory measures being considered to make progress on an issue that concerns many Members. Our concerns are about a number of products—I want to put on record what we are talking about—and the lack of action on such products in contrast to dealing with the bank levy and whether it is applied appropriately.

First, there are payday loans. Many people will be familiar with the concept of a short-term loan, and given that almost half of households cannot make their pay cheques last to the end of the month, it is no surprise that almost one third of households are now considering such products. Interest rates on such loans include one from a company called Oakam, of about 443%; and many people will be familiar with Wonga, whose rates are more at the 4,000% level. We are also talking about the home credit industry and companies such as Provident. Many people will be familiar with Provident going from door to door in their communities lending money to people at interest rates of, say, 272%. That means that if someone borrows just £300 from the company—perhaps to buy a new sofa or TV, or to fix a washing machine or a boiler that has gone wrong over the winter—that will cost them £546.

Were we to use this amendment and the opportunity of the bank levy to deal with some of these problems and with the actions of some of these companies, we would be encouraging the Government to look at the concept of adequacy and consider some of the issues in that market. First, there is the lack of competition in providing credit to those who are denied mainstream credit. That is embodied in the fact that there is no innovation in these products; they are very similar. There is therefore a great contrast with people who are able to borrow from mainstream creditors. Many people will be familiar with mainstream banks offering preferential rates and loyalty schemes to customers who they want to hold on to because they know that they have alternative sources of credit. We could apply the bank levy to the question of adequacy and ask whether these companies are acting in a way that is detrimental to consumers and whether the lack of competition is detrimental to consumers and to our economy. Many people have expressed concern that our banking industry is already overloaded, which requires more competition. I would argue that there needs to be more competition in lending to people who cannot access mainstream credit, and this is one way in which we could achieve that.

A quarter of the customers who use high-cost-credit companies cannot borrow from other lenders. As a consequence, they do not build up the evidence of being good borrowers that would allow them to use mainstream sources of credit. These companies do not share information on their customers, making it incredibly difficult for customers to prove that they could use more mainstream sources of credit. The question of adequacy could also be applied to companies’ use of rollovers and stepping up of loans, which means that borrowers are stuck with using them. In particular, because they often lend only small amounts of money to begin with—

--- Later in debate ---

[Stella Creasy]

The hon. Gentleman appears to be arguing that the money that would be raised by the bank levy should be given to the high-cost credit industry. Far be it from me to suggest that he wants to support those kinds of businesses. I know that some Liberal Democrat Members have been very supportive of these companies—mistakenly, because if they were to talk to the local communities affected by them, they would realise how damaging they are.

Let me be very clear: I am arguing for the ability of the Government to review the bank levy and for a review to consider whether it could be applied in such a way as to discourage lending that is detrimental to consumers. I have firmly in my sights the high-cost credit industry and the detriment that it causes to our local communities. I hope that Ministers will accept the amendment and explore whether the bank levy could be used to act as a positive behavioural challenge on these companies, because that would benefit many people in our country. I do not want to see investment in the high-cost credit industry, and I am sure that the hon. Member for Bradford East (Mr Ward) did not mean to suggest that, but I do want to see action on it, and I know that I am not alone in this House in hoping for that.

If the Government will not accept the amendment, I will table more amendments and keep pressing this issue, and I hope that other Members will join me in support. The Minister is shaking his head. I hope that he has spoken to the many Members on his own Benches who do not shake their heads and walk on by as people are preyed on by these companies. I spent yesterday with 900 members of London Citizens Black Clergy Caucus, who will be seeking urgent meetings with the Ministers responsible. Ministers may think they can ignore me or ignore Labour Members, but I hope that they will not ignore the millions of people who are struggling to pay their bills and make ends meet, and for whom these companies are increasingly the only option. Regulation has worked effectively in other countries, and it could be achieved through this Bill. I hope that the Minister will look at the case seriously and not dismiss it out of hand as he appears to be doing.

[Barry Gardiner]

It seems to me that when it comes to bonuses, the clue is in the word. If one looks at the etymology, the word “bonus” comes from the Latin: it means “good”. In fact, it should be “bonum”, as with “maximum”, “minimum” and “premium”, so that we had “bonum” and “bona”, but let us leave that aside. The bonus culture in the banks is supposed to be for something good—for good performance—and yet, certainly within the banks that are largely owned by the public, these bonuses are being given almost uniformly for bad performances: they are “malum”, not “bonum”. It is really quite ridiculous that these bonuses should be paid and that the Government should be proposing to levy such a low rate against them.

The right hon. Member for Wokingham (Mr Redwood) gave us a bit of the history of how the recession had come about and the context in which these bonuses were being paid. Interestingly, however, his history stopped in 2006 or 2007, when he published a paper about the regulatory regime and the need for tighter regulation. To find out the true history of this, one has to go back to a time before 2006 and 2007, and beyond this country, to look at the sub-prime market in the United States in 2000. At that time, the proportion of mortgages in the United States that were lent to sub-prime borrowers was just 5%. Between 2000 and 2005, that increased to 47%. That meant that by 2005, 45% of mortgages in the US were in arrears by two months, or more than 60 days. That is the origin of the problem.

Much has been said by Government Members to try to set the recession in context. For months, they have said that it was because of the Labour Government’s disastrous economic management. Of course, the context for it is in the United States, where what happened with Fannie Mae and Freddie Mac, the two major mortgage-lending institutions, was the beginning of the collapse of what had been a virtuous circle, and what became a vicious one. Those institutions could not lend because they were not getting revenues in, which was because people with mortgages were more than two months in arrears. That meant that there was a drying up of credit in the system in the United States.

One of my hon. Friends—I cannot remember who—mentioned the role played by the rating agencies. The way in which the situation impacted more widely on the economy, first in the United States and subsequently elsewhere, was through the securitisation of mortgages into bundles to create revenue streams for companies and, indeed, for financial institutions.

[Andrew Gwynne]

My hon. Friend is making a perfectly good point about the historical context of the global downturn. Is it not the case that the bubble burst because financial institutions across the globe were not certain about the packages that they had bought, because of the unpicking of those packages, and because of the percentages of those packages that were made up of bad debt?

[Barry Gardiner]

My hon. Friend is right, but perhaps he has missed a further element of that toxic mix. That is not the role of the rating agencies, although they played their part in bundling up sub-prime mortgages. In order to securitise them into revenue streams for companies, they had looked at the historical rate of default in the sub-prime sector in 2000, when only 5% of the market was being sold to sub-prime borrowers, not in 2005, when the figure was 47%. The effect was that many companies had security streams that were not very secure. The piece of the toxic mix that we need to introduce is the way in which hedge funds brought to bear their financial might.

[The Temporary Chair (Mr James Gray)]

rose—

[Barry Gardiner]

I give way to Mr Gray.

[The Temporary Chair]

Order. The hon. Gentleman is not giving way to the Chair, but resuming his seat. He is giving an interesting explanation of the causes of the banking crisis. He must relate his point to amendment 9, which we are discussing, rather than dilating more generally on the subject.

[Barry Gardiner]

Of course I wish to abide by your ruling, Mr Gray. I am referring to earlier comments in the debate, which I am sure you heard, from the right hon. Member for Wokingham, who was not ruled out of order. He gave an interesting explanation of the history of what we are discussing.

[The Temporary Chair]

Order. I was not in the Chair at that time. It seems to me important that we relate the debate to what we are supposed to be debating, namely amendment 9. I am not aware of what happened previously, but I suggest that the hon. Gentleman relates his comments directly to the amendment.

[Barry Gardiner]

I am very happy to do so, Mr Gray. We are talking about a bank levy, and amendment 9 refers to

“the Government’s analysis behind the rate and threshold chosen for the bank levy”.

It seems to me that if one is to perform an analysis of the rate and threshold chosen, one has to understand how these things came about and the historical context. More importantly, one has to understand the regulatory context and what went wrong in the regulatory system. Much of the debate has been about that regulatory structure. I am seeking to address subsection (2)(a) proposed in the amendment. That is exactly the import of my remarks.

As the hedge funds brought their pressure to bear, they identified the problem of the companies’ overvaluation in the market. They saw that the structure of the bundled streams of security was not providing the security to the companies that the market believed it was providing. The hedge funds then short sold on those companies. That was an important regulatory failure. There was no uptake rule and no clear limit on the arbitrage window that was allowed for trading on such shares, so the short selling allowed the hedge funds to beat down the value of those financial institutions in such a way that there was a precipitation of the collapse of the credit that could flow through the financial institutions, which infected all the other companies in the stock exchange. That is how the situation became a global crisis.

In addressing the analysis that the amendment asks the Government to engage in, I urge them to take seriously the regulatory failings at that time. [Interruption.] The Financial Secretary says from a sedentary position that those were the mistakes of the previous Government. What I am pointing out to him is that they were not simply mistakes made by the previous Government, but mistakes that were made on a global scale. The financial crisis started in the sub-prime market in the US, and that infected the global markets. The reason that it took hold in the UK, to the detriment of this country, was that we had placed an over-reliance on the financial markets and the financial sector as opposed to manufacturing and industry.

[Mr Kevan Jones]

Does my hon. Friend agree that if we had listened to those on the Conservative Front Bench, including the Chancellor of the Exchequer, who did not want to intervene in Northern Rock and wanted to let banks go bust, the banking crisis in this country would have—[Interruption.] The Economic Secretary chunters from a sedentary position, but what I am saying was said by the—[Interruption.] She can keep chuntering, but the truth hurts. The fact of the matter is that if we had listened to the Chancellor—

--- Later in debate ---

[Barry Gardiner]

I am of course always happy to abide by your ruling, Mr Gray, so I will move on to focus on the adequacy of the bank levy in the context of other reforms to the wider banking system. It is clear that those other reforms are necessary. We can debate the history at length, and we may take different lessons from that history about the type of regulatory reform that we wish to see, but I want to focus on the adequacy of the levy.

--- Later in debate ---

[Mr Love]

Is it not also the case that the taxpayer has given the banking system an unlimited guarantee, and that according to the Bank of England, we are subsidising the banks to the tune of about £100 billion a year? Yet even with all that support, they still demand that they should be able to pay massive bonuses.

[Barry Gardiner]

Indeed. The support that the country has given the banks is perfectly right, in my view. I disagree with the right hon. Member for Wokingham on the matter. He said that he would not have bailed out the banks at all. His position was very clear—he takes a very hard monetarist line and says that if the banks fail, they fail. Labour Members believe that the consequences of that failure cannot simply be ignored.

[Mr Kevan Jones]

Is that not exactly the line that the Chancellor took when he was shadow Chancellor? He argued that intervention was not important in the case of Northern Rock, for example. If we had followed what he suggested and had less regulation of the banking system, we would have been in a worse situation than we are now.

[Barry Gardiner]

My hon. Friend is absolutely right. To give the right hon. Member for Wokingham his due, he did distinguish his own position on the issue from that of his party’s Front Benchers. Both would have failed to support Northern Rock, the consequences of which would have been disastrous for savers, but the right hon. Gentleman would have gone further. He would have stopped any support for the wider banking system, including for Halifax, the Royal Bank of Scotland and Lloyds. There we see the consequences of policies that had their origin in “There’s no such thing as society.” Only if someone does not pay regard to society can they adopt such a hard-line position, because it ignores the consequences of failure and the effect on ordinary human beings—not just savers but, as he said, investors. The structural consequences of the failure would have been economically disastrous for this country.

[Andrew Gwynne]

Is it not also the case that the banking system is getting the best of both worlds? Over the past few years it has received very substantial support for the taxpayer, but at the same time as paying itself ever-increasing bonuses it is refusing to invest in local companies and valid business propositions in all our constituencies, thus hampering economic growth across the country. Is it not right that the bank levy is introduced for a second year and beyond through the reviews suggested in the amendment, so that we can get that growth back into the economy?

[Barry Gardiner]

My hon. Friend makes an excellent point in contrasting the lending policies of the banks with the bonuses that they seek to pay, particularly to their higher-end staff. The Government have to be much clearer in the regulatory demands that they impose on the banks, because they are speaking with forked tongue. On one hand, they are insisting that there is tighter regulation and that there is a regime to ensure that there are adequate reserves and far more stringency in the banks’ investment policies. On the other hand, they are on the side of business, urging the banks to lend more money. It is not possible for them to have it both ways, and we must not fall into that trap either. Either the Government have to say, “We want tighter regulation, and to hell with small business”, or they have to say, “No, we want small businesses to thrive, because we want growth in the economy”, in which case the regulatory regime for banks has to allow for that.

That does not affect my hon. Friend’s point, because he is absolutely right to contrast the bonus structure with the banks’ lending policy. The bankers expect the situation to be all good for them, but it is not so good when they are dishing out the money at the other end.

[Andrew Gwynne]

My hon. Friend is exactly right. Is not the real problem that we are actually getting neither of the things that he mentions? We are getting neither effective regulation of the banks nor money flowing into small and medium-sized enterprises.

[Barry Gardiner]

That is the sad fact of our situation. I am sure that all of us, as constituency MPs, have business people coming to us saying that they cannot get credit. Indeed, many successful businesses that have had no change in their circumstances are suddenly being told by their banks that their credit facilities are no longer there. The banks are unilaterally changing the terms of those facilities, and the Government must do something about that. They cannot on one hand let the banks off with a £20 billion tax allowance for bonuses and, on the other hand, say that they do not have to ensure that they are lending to small businesses.

The difference between Opposition and Government Members goes right to the heart of whether we believe that the most important thing to do is to get growth back into the economy, get money flowing into small businesses and pay people a decent wage rather than make them redundant—that means that their spending on goods and services does not contract, and they spend money on brown goods and white goods and generate wealth and jobs in the economy, so that we grow our way through the problems—or whether we believe that we have simply to cut, cut, cut the public sector and pay, pay, pay the bankers’ bonuses.

[John McDonnell]

I would welcome the amendment because I think it is time to stand back and review the future role of levies. The amendment seeks to prise out the Government’s analysis regarding the rate and the threshold of the levy, but it also gives us the opportunity to debate the overall adequacy of a levy and its role in the economic situation that we face.

I echo the right hon. Member for Wokingham (Mr Redwood) in saying that the world has moved on and the role of bank levies is different now. The first early-day motion on this matter, tabled by my hon. Friend the Member for Islington North (Jeremy Corbyn) and I eight years ago, in advance of the crisis, related specifically to the profligacy of the banks in their distribution of bonuses. We gained the support of 40 Members of the House. At that stage, the role of the proposed levy was fairly clear cut and straightforward: it was to act as a disincentive to the payment of such obscene bonuses, as others have described them.

Then, economic crisis hit us. The first sign was Northern Rock. I remember being in the Chamber when we exposed the role of Granite in Northern Rock and the tax fiddles, avoidance and evasion—whatever we want to call it—that were taking place. We called for the Government to use public ownership to nationalise and stabilise the banking system, but we added to that a call for the maintenance of a levy system, because we wanted to prevent a recurrence of the bankers’ bonuses during a period of recession caused by their profligacy.

As the right hon. Member for Wokingham said, the world has moved on, and we now have a bizarre situation. Yes, a levy on privately owned banks that are making profits and paying large bonuses is relevant, but introducing a levy on publicly owned banks is bizarre—it is a circular form of taxation—which is why the review proposed in the amendment is important. Surely if we own banks, we should end such bonuses by diktat and enforce reasonable lending using our management control. I hope that the review will examine the adequacy of future bank levy arrangements.

I compliment a number of my hon. Friends who have spoken in this debate, none more passionately than my hon. Friend the Member for Wansbeck (Ian Lavery), who reflected the climate of anger in which this debate takes place. There is anger about how individuals have been treated by the banks, but also anger about the impact of the banks on the overall economy. The impact has also been felt by families in the loss of jobs and cuts in services. If we are to have a review of the bank levy, I would welcome a commitment to absolute openness and transparency about the nature of the banks’ current operations. Many people are bewildered by the banks’ lack of adherence to the exhortations of successive Governments on the role that they should play, particularly in lending and long-term investment.

I welcome the proposed production of a report, but I would prefer it to be published earlier. The amendment proposes a deadline of “before 31 December 2011”, but I would want the report no later than the autumn, because I believe we need a tighter analysis and review regime for the banks.

I am no longer sure that the Government know what the levy is meant to achieve; they are certainly not clear on the appropriate rate, or even to whom and what the levy should apply. The previous Chancellor’s levy was clearly a bonus tax: it was an attempt to influence the behaviour of the banks and to end the remuneration system that encouraged reckless behaviour and the taking of excessive risk. The objective was also to raise income, although that was not the stated primary aim. Bizarrely—this is why I admitted an error earlier—the levy failed to influence behaviour, because the bonuses continued, but at the same time it was extremely successful at raising income. In fact, it was seven times more successful than was originally predicted. As I said, the original prediction was that it would to reap £500 million, but £3.5 billion was gained.

--- Later in debate ---

[Barry Gardiner]

If I interpreted the note correctly, it was a projection of what might happen as a result of the fiscal measures. It did not answer the question posed by my hon. Friend, which concerned an analysis of the results of the differing policies on carbon reduction hitherto. Does he agree that it is vital that we use green taxation only as a means of changing behaviour, and never solely as a revenue-raising measure? That is the question that he posed about past policy, and the Economic Secretary did not answer it.

[Hugh Bayley]

One would assume that a Government estimate has been made on the basis of some evidence. My hon. Friend shrugs his shoulders, but he was in government for a time and I certainly give a Government the benefit of the doubt. I believe that their civil servants would make the best estimate they could based on the evidence they had. Past responses to fiscal changes in the taxation of fuel would of course be a good indicator. Either the Minister can tell me that that is the basis on which the estimate has been made or she is not certain. If she is not certain she should be honest and say so, because we will then need the further analysis proposed in the amendment.

Amendment of the Law

Barry Gardiner Excerpts

Wednesday 23rd March 2011 Commons Chamber

[Barry Gardiner (Brent North) (Lab)]

I shall try to honour the time constraints that you have imposed Mr Deputy Speaker.

Today the United Kingdom has the highest inflation since the days of Margaret Thatcher. The RPI stands at 5.5% and the CPI at 4.4%. Today the United Kingdom has seen the Chancellor announce a lowering of the growth forecast from the 2.6% predicted by the Office for Budget Responsibility last year and the 2.3% in the last Budget to 1.7% today. Today the United Kingdom has the highest unemployment since 1984, when John Major had just taken over from Margaret Thatcher. This is not a Budget for growth into the future. It is a Budget that will take us back to the future of Margaret Thatcher and John Major.

Inflation at 5.5% has a devastating impact on families in the UK, as £1 in every £20 that they earn is now lost. For example, the Secretary of State for Environment, Food and Rural Affairs gave up an enormous 24% of her departmental budget to the Treasury over this spending period, but inflation has now turned that into a real-terms cut of 31%. Have Treasury Ministers commissioned, or do they intend to commission, any research into the capacity of Departments to deliver on their performance indicators, given the effects of rising inflation on the departmental spending cuts that have already been incurred?

It is risible that this Budget has been delivered by a Government who style themselves the greenest ever. The establishment of the green investment bank has been delayed until 2012, and it is still unclear whether it can fully function as a bank or whether it will simply be a glorified fund. The carbon reduction commitment has already outraged the CBI and British business. Instead of rewarding energy-efficient businesses and returning £1 billion to business, as the Labour Government proposed when we introduced the scheme, the Treasury has shifted the goalposts and taken all of the money to itself. I had thought that the implementation of the scheme had been delayed until 2012-13, and that was certainly what was announced to business, but I see from measure O in table 2.2 on page 44 of the Red Book that the Government are now forecasting £715 million of revenue to the Treasury in 2011-12 from that scheme that only goes live in 2012-13. I ask Treasury Ministers to reconcile that anomaly.

The carbon floor price appears on the face of it to be a positive green measure, but in fact it betrays the lack of coherence in Government thinking on this area. The Government’s electricity market reform recognises the need to incentivise 18 GWe of new generation capacity in the UK by 2024. That is the equivalent of £200 billion of investment between now and 2020. As Ministers know, much of this generation capacity will come from gas. At a stroke, the Government have pushed away the very investors they sought to attract. They are now likely to encourage more imports and external dependency. Why should European generators generate in the UK when they can generate abroad with no such tax upon them, and then benefit from higher UK prices by use of the interconnectors? One element of the Government’s energy market reform strategy has been to increase the use of interconnectors. As a result of this step, investment will be pushed into France, Belgium and the Netherlands. There is incoherence at the heart of the Government’s thinking on this matter.

I did not support the Government in the Lobby on Monday night in the vote on military action in Libya. I pay tribute to our armed services, and to their valour and the work they do, but I cannot support the cost of the military escapade taking place in Libya, and I look to what could have been achieved if the funds being expended there were instead being expended around the rest of our country.

[Mr Kevan Jones]

Will my hon. Friend give way?

[Barry Gardiner]

No, I will not.

One Tomahawk missile costs £350,000, and 140 of them were launched in the first 48 hours of the attack, which amounts to a cost of £50 million. It is estimated that the cost of prosecuting this military conflict is £6 million each day. The cost of one day of action in Libya could restore in its entirety the £2.25 million of cuts in children’s services forced on my community in Brent by this Liberal-Conservative coalition Government. One month in Libya could protect children’s services across the whole of London. Nine months in Libya could protect children’s services across the entire UK. Aneurin Bevan once said that priorities is the language of socialism. Those are my priorities and that is why I will oppose this Budget.

Bank Bonuses

Barry Gardiner Excerpts

Tuesday 11th January 2011 Commons Chamber

[Mr Osborne]

Nothing meaningful was secured on lending to small businesses by the previous Government at the very moment when they had maximum leverage: when they were bailing out these banks. That is part of what we are dealing with. We are also dealing with the situation in which they bought their very large stake in the Royal Bank of Scotland—as I have said, the deal explicitly says that the bonuses covering the year 2010 should be paid at market rates. I am saying that we want to see the bonus pool smaller and the Royal Bank of Scotland as a back-marker, rather than a front-runner.

[Barry Gardiner (Brent North) (Lab)]

Was it coincidence or careful Treasury planning that ensured that the amount projected in this year’s bonuses was the same as the £7 billion that the Government have taken in cuts? Does the Chancellor understand why people in this country make an equation between those two and are so very angry about it?

[Mr Osborne]

Of course I understand the British people’s anger at the economic mess that the banking community and the previous Government helped to create, but they also support those with a serious economic plan to put right those mistakes. At the moment, they are not hearing a serious economic plan from the Labour party.

Autumn Forecast

Barry Gardiner Excerpts

Monday 29th November 2010 Commons Chamber

[Mr Osborne]

I certainly agree with my hon. Friend that an essential part of this programme for public expenditure is getting greater productivity in the public services. As the former Chair of the Public Accounts Committee, he has much to offer. The Treasury is engaging with him on this, I hope, and will engage further with him in the coming months. He is absolutely right that, in a period when there is less money available, if we do not have reform, we will have deterioration in the service. That is why we have got to have reforms and why Parliament is being asked to support those reforms in the next few months.

[Barry Gardiner (Brent North) (Lab)]

The OBR’s central forecast is for a “relatively sluggish medium-term outlook”, which it says

“reflects…the impact of the Government’s fiscal consolidation.”

Can the Chancellor confirm that it follows from this that if the Government’s fiscal consolidation had been less severe, the medium-term outlook would be less sluggish? In other words, he has cut too far and too fast, just as Ireland has.

[Mr Osborne]

The short answer is no. We inherited a situation of very deep recession, a major banking crisis and a record fiscal deficit. I thought—although one is never sure—it was common ground across the parties that at least we had to do something to address the fiscal deficit, not that we have heard specific measures from the Opposition for doing that. In the summer, the OBR produced a comparison of the growth forecasts under the previous Government’s plans and under the plans of the current Government, which showed that over a period of time we were putting forward a much more sustainable path for growth that would lead to higher growth in the future. It also avoids the downside risk—the tail risk—of a major fiscal event, which would be a major loss of confidence in the UK. It is pretty remarkable that here we are today debating the numbers, and that is fine, but we are not having to worry about the UK’s creditworthiness, unlike some other countries in the European Union, even though we inherited the largest budget deficit in the EU. We have taken measures to take ourselves out of that firing line, and now we have sustainable growth and jobs are being created.