Finance Bill

Bill Esterson Excerpts

Tuesday 3rd July 2012 Commons Chamber

[Catherine McKinnell]

I thank my hon. Friend. I have not made much progress yet, but the point that I was trying to make is that a whole series of actions by the banks have let ordinary people and businesses down. It is time that the banks played their part in putting some of that right.

[Bill Esterson (Sefton Central) (Lab)]

I apologise if I am preventing my hon. Friend from making progress. She need take no lessons from Conservative Members about regulation. They wanted less regulation, not more, and the point that they are trying to make now is disgraceful.

The issue is fairness. People are crying out for a repeat of the bank bonus tax in these tough times. Those with the broadest shoulders should make the biggest contribution in dealing with our problems. Many problems, particularly those faced by young people, could be resolved by the new clause.

[Catherine McKinnell]

My hon. Friend sums up in a nutshell why I am speaking in favour of the new clause.

The shocking revelations from Barclays this week are nothing short of a scandal. Barclays—along with we do not know how many other banks now under investigation —broke the rules to make a profit and put global economic stability at risk. It played fast and loose with rates that affect people’s mortgages and credit cards and, it would appear, gave little thought to how people could be affected.

In another shocking scandal, we found out that thousands of small businesses had been sold expensive insurance products that they did not need and could not use, spending money, which could have been used to protect jobs, to pay for products that never should have been offered to them in the first place. How many businesses have lost out as a result? All those actions on the part of the banks were totally unacceptable. The banks have been taking without giving back. The Government can take action now to put the situation right.

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[Catherine McKinnell]

I absolutely agree. It is not just about giving opportunities to young people where so few exist, but about this desperately concerning period in which we risk creating an entire lost generation, because young people are coming out of school, higher education and college and finding no opportunities at the other end. Once they fail to get on to the ladder of work and opportunities, the consequences can be long term and cause a lifetime of damage. The Government need to factor that in and grasp it now before it is too late to make sure that these opportunities are provided and that too many young people do not miss out. That is why it is so important that we use this opportunity to make sure that the bankers who caused much of the global economic and financial meltdown take responsibility for that and pay their way, giving young people real chances and opportunities.

[Bill Esterson]

My hon. Friend is making a powerful case for repeating the bank bonus tax. Does she agree that the Government should be considering the evidence from the 1980s about the effect that long spells of youth unemployment had on young people and how hard it was for many of them ever to find decent jobs and catch up? As a result of the Government’s delay and refusal to adopt this policy, they are in grave danger of repeating exactly the same mistakes, with all the misery that that will cause.

[Catherine McKinnell]

My hon. Friend makes a powerful intervention and reminds me particularly of my own region, the north-east, where too many people lost out on opportunities in the 1980s and never quite recovered from the experience. When I talk to young people today, I find that some of the brightest are coming out of school and choosing not to go to university or college but instead to try desperately to find whatever work opportunities might be available to them because, apart from the fact that they are put off by the tuition fees, they are so worried that if they did step on the ladder and go to university they would come out at the end to find there were still no opportunities. There is a deep sense of anxiety among young people that the Government need to be seriously aware of.

That is what is so concerning about the scrapping of the future jobs fund, which was not only providing real opportunities for young people and breaking the cycles of lack of opportunity, but helping businesses to open up and take on young people in particular. The Government replaced it with the work experience scheme, which they eventually rolled out last year and which offers only eight-week, unpaid placements. There is nothing to say that that is not valuable in itself, but it is simply not doing enough for enough young people. It is also available only for people under 21, so it does not cover unemployed people who have left further or higher education. Again, that compounds some of the anxieties that young people are expressing to me when they say that if they go on to college or university they will be no better offer at the end and they will instead be saddled with a lifetime of debt.

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[Charlie Elphicke]

My position is that the bank levy strikes the right balance. That is why I asked the shadow Minister whether her proposal would be in addition to, or an alternative to, the bank levy. That is significant. She is arguing, on the gross figures, for more than £3 billion more to be pulled out of the banking system. That would have an immediate effect on the capital that banks can lend to small businesses and hard-pressed home owners.

[Bill Esterson]

The hon. Gentleman says that his solution is to get the banks lending again. This Government have categorically failed at that. What we are coming forward with is a concrete set of proposals. He has acknowledged that youth unemployment in his constituency is a problem and that it has doubled since his Government came to power. Why will he not accept concrete proposals that would deal with the blight that faces many young people in his constituency?

[Charlie Elphicke]

The hon. Gentleman is simply suggesting that we give with one hand and take away with the other. He might think that he can throw lots of money at dealing with the problem of youth unemployment, but he would meanwhile be constraining businesses in getting the capital that they need to create new jobs and maintain their existing jobs. That is the central flaw in the Opposition’s argument. They want to take more money out of the banking system when capital and lending are already constrained.

The issue that we need to deal with is bonuses. The Government have taken action on bonuses in the taxpayer-owned banks. They have said that there will be no cash bonuses of more than £2,000 at the taxpayer-owned banks. It is right to have longer-term share incentivisation schemes, which align people’s interests with the success of the banks over the longer term.

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The Opposition would have us believe that their bank bonus levy raised more money than the coalition’s bank levy, but that does not quite stack up, does it? The gross receipts from the Labour Government’s bank bonus tax were £3.45 billion, but the net yield was estimated to be more like £2.3 billion. The explanation for that was given by Lord Sassoon in a detailed written answer to Lord Myners. Under the current Government—Ministers will correct me if I have got it wrong—the permanent bank levy raises about £2.5 billion, which is more money than Labour’s levy. I would have thought the Opposition would welcome that.

[Bill Esterson]

The hon. Gentleman keeps saying that the amount raised by Labour’s levy was lower than £3.5 billion, but the Office for Budget Responsibility has given only one figure. Can he confirm what it was?

[Charlie Elphicke]

The OBR has given so many different figures that I do not know exactly which one the hon. Gentleman is referring to. I will read him what Lord Sassoon said:

“The net yield raised by the bank payroll tax is estimated to be £2.3 billion, while gross receipts were £3.45 billion. An explanation of the methodology underlying the estimate of net yield can be found in”

a previous written answer. He continued:

“In line with guidance from the Office for National Statistics, the yield from the bank payroll tax was allocated to the 2010-11 tax year, as this is the point at which the tax was passed into legislation.”—[Official Report, House of Lords, 20 January 2011; Vol. 724, c. WA57.]

The current Government’s levy on banks therefore raised more than the previous Government’s levy.

The previous Government said that their levy was meant to be a one-off, but now Labour is in opposition it is saying, “Let’s make it permanent.” It also wants to make it additional to the permanent bank levy, and it is using the recent scandal, of which Barclays is the first bank to be found guilty publicly, as an excuse to do that. It should be more responsible in opposition than that.

[Bill Esterson]

As the hon. Gentleman will not admit to the figure that the OBR gave for Labour’s levy, I will tell him that it was £3.5 billon. The Government set up the OBR as an independent organisation to give such figures, so I am absolutely amazed that he will not rely on it. That is nearly double the amount raised by the current bank levy in its first year, and significantly more than is predicted for coming years. As we have heard from the shadow Minister, the predicted figure is falling because of the recession that has been created in Downing street.

[Charlie Elphicke]

I believe that the OBR’s figure was for gross receipts, which were not £3.5 billion but £3.45 billion. We need to examine the net yield raised, which was £2.3 billion. That is a lower figure than the £2.5 billion raised under the current Government’s system. I appreciate that the difference between net and gross can be confusing, because not all of us are accountants—I certainly am not. Nevertheless, more cash is coming through the door under the current Government’s arrangements.

The hon. Gentleman’s argument misses a central point, which is that the Opposition want their bank bonus levy to be an additional impost on the banks. My concern is that that would pull more capital out of the banking system. Right now, we need to lend to business and kick-start the economy.

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[Bill Esterson]

rose—

[Charlie Elphicke]

I have taken enough interventions. I have been generous in giving way and in dealing in detail with the hon. Gentleman’s points in particular.

The Opposition are saying, it seems, that we should take more money out of the banking system, but that would be irresponsible because it would constrain banks’ ability to lend. The Opposition use Barclays as an excuse to blame everything on greedy traders manipulating the LIBOR interest rate. I would urge caution, however, because I have looked through some of the internal documents floating around, particularly the note of a conversation involving Paul Tucker of the Bank of England. If I may, Madam Deputy Speaker, I shall briefly read it to the House by way of scene setting and to demonstrate the Opposition’s mischievousness in seeking to impose this tax.

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[Graeme Morrice]

A good point, Madam Deputy Speaker. I suspect that my hon. Friend might repeat some of my points, as we Labour Members have robust arguments in support of the bank bonus tax in new clause 13, to which I am delighted to lend my support this evening.

Given the dramatic events at Barclays over the past few days, it is particularly apposite to be discussing the contribution of the banks to the well-being of our economy and how to deal with the excessive bonus culture in the financial services sector. Our position on this issue has been clear and consistent: bonuses should be exceptional payments paid for exceptional performance. Far too many highly paid bankers, however, continue to be paid astronomical bonuses, often seemingly with little or no connection to meeting their performance targets. While such excessive and unjustifiable bonuses remain, the case for a tax on bank bonuses is strong and undoubtedly popular with the public. The LIBOR scandal at Barclays will cause the banks’ reputation to plummet to a new low. Few would have believed that the public’s opinion of them could get any worse, but they manage to keep coming up with inventive new ways of further undermining the trust of their customers and the wider population.

[Bill Esterson]

My hon. Friend has made an important point about the popularity of a tax on bank bonuses with the public, but the tax should not just be popular; it should also work. Nothing that Government have done has remotely worked, and those failures—including their failure in regard to bank lending—are the real reason why this is the right thing to do.

[Graeme Morrice]

I agree, and I shall deal with that aspect of bank lending in due course. It is vital for people’s trust in British banks to be restored as quickly as possible.

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[Graeme Morrice]

That may be the hon. Gentleman’s opinion, but I reiterate the point that, because of the Government’s policies of the past two years, the official figures show that banks lent £9.5 billion less to SMEs last year than in the previous year, so there is a problem now.

[Bill Esterson]

My hon. Friend is right about the poor state of bank lending, but the reality is that the banks are not lending because they have no confidence; they have no confidence in this Government because they have pushed us back into a double-dip recession. That is the reality, and that is why action is needed. That is why this Labour proposal is the right way forward to kick-start the economy and start to solve the problem of youth unemployment.

[Graeme Morrice]

I agree. I am sure that many Members have been contacted by SMEs based in their constituencies who are desperate because they cannot attract as much lending from the banks and other financial institutions as they enjoyed a number of years ago. While many are critical of the lending banks, they are also critical of Government policy. Members on the Government Benches may not agree with that, but it is the reality, and that is why people are approaching us with these complaints and concerns.

The continued failure on lending is making a mockery of the Chancellor’s promise to link the pay of the chief executives of each bank with performance against SME lending targets, but there is now another chance for Members on the Government Benches to demonstrate to their constituents that they are genuine about making bankers pay their fair share. Labour’s bank bonus tax raised about £3.5 billion, as confirmed by the independent Office for Budget Responsibility. As my hon. Friend the Member for Wansbeck (Ian Lavery) said, even on a cautious estimate, we believe that this year alone it could raise at least £2 billion, over and above what is already in place. The Government could use those funds to introduce the real jobs guarantee for young people who are long-term unemployed, potentially helping 100,000 into work. It could also be used to build thousands of much-needed new affordable homes.

In conclusion, by supporting the new clause hon. Members can show that we are serious about holding bankers to account and ensuring that they pay their fair share, while also raising additional funds to address the people’s priorities—youth jobs and affordable homes—and make a real contribution to turning around our ailing economy.

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[Alison McGovern]

I would like to begin my remarks on new clause 13 by agreeing with much of what has been said today by Opposition colleagues. I want briefly to take the House back a couple of years to 2010, when I was lucky enough to secure an Adjournment debate on young people and unemployment, the first such debate I led in the House. For me, it could not have been on a more important subject than the position of young people in the labour market in my constituency. I do not wish to put myself forward as some kind of Cassandra or some awful foreseer of what has come about, but I warned the Minister then that the swift withdrawal of some of the more successful things the Labour Government had been doing to tackle young people’s unemployment would lead to more young people being on the dole. Sadly, that is what has happened. In fact, two years later the ONS tells us that an extra 65,000 16 to 24-year-olds are now without work. That is not just a waste of talent and funds, but a moral shame.

I want to say a few words on that subject and why new clause 13 is so important to young people facing that difficult situation. The Government have had two years to tackle the problem, yet all of us here have to admit that the problem is getting worse, not better, and that action is needed more today than it was in 2010. The Government would not listen then; I beg them to listen now.

[Bill Esterson]

My hon. Friend has a proud record, before and since reaching this place, of advocating for young people and employment. She is quite right to draw attention to the Government’s record. We should remember that we saw the same thing happen in the ’90s. The Government are going back to exactly the same failed policies of the ’90s. The difference between Government and Opposition Members is that when we were in government we looked after unemployment. We kept unemployment, repossessions and business failures low. Under this lot they have gone up and we are seeing the problems for young people, which is why we need the action we are debating right now.

[Alison McGovern]

I thank my hon. Friend and neighbour in Merseyside for his intervention. He is quite right. The return to things such as the youth training scheme has been one of the most unfortunate aspects of the Government’s work in this area.

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[Bill Esterson]

Youth unemployment is higher than when Labour left office, unemployment generally is higher than when Labour left office, and the economy was growing when Labour left office whereas now we are back in recession. Will the Minister confirm all three of those facts?

[Mr Hoban]

The challenge that we face is dealing with the economic legacy left by Labour, with the huge boom in financial services and the huge bust that followed.

We have heard Labour Members’ story that they presided over a golden age in the financial services sector. The hon. Member for Newcastle upon Tyne North (Catherine McKinnell) could not bring herself to admit that the scandal over LIBOR fixing took place between 2005 and 2008 or that the interest rate mis-selling that affected so many small businesses took place in the same period leading up to the financial crisis.

Labour Members deplore the bonus culture, but let us not forget that when they were in government, bonuses were paid out in the year that they were earned and paid out in cash. That was the hallmark of the age of irresponsibility that characterised their time in office. This Government are taking action to tackle the bonus culture. This Government have introduced rules to ensure that bonuses are not paid out in the year they are earned but spread over a three-year period, that they are not paid out in cash but in shares, and, crucially, that they can be clawed back where there have been problems in the business or where there has been wrongdoing. This Government have tackled the bonus culture in the UK whereas the previous Government let it run riot, and we have seen the financial consequences of their so doing.

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[Bill Esterson]

When listening to the hon. Member for Bristol West (Stephen Williams), I was reminded of the rather depressing speeches and interventions from some of his Tory colleagues in our previous debates on youth unemployment and the bank bonus tax, who showed very clearly that they do not live in the real world. They have no idea of the impact on young people of the chronic levels of unemployment they now face or the depressing reality that this is a repeat of what happened under the Tories in the ’80s and ’90s.

The shadow Chief Secretary to the Treasury mentioned Bob Diamond’s £100 million in bonuses, which, under the real jobs guarantee scheme, would create 25,000 jobs for young people. I wonder whether Government Members consider that a better use of £100 million in bankers’ bonuses, because I certainly do.

We have already seen new schemes from the Government which are depressingly familiar; they remind me of the youth opportunities programme and its successor, the youth training scheme, in the early ’80s, and of how benefits were withdrawn from young people during those years when there were no jobs. There are no jobs for young people in my constituency or in many parts of the country.

[Heather Wheeler (South Derbyshire) (Con)]

Will the hon. Gentleman give way?

[Bill Esterson]

I will always give way to a fellow member of the Communities and Local Government Committee.

[Heather Wheeler]

Why is it that in South Derbyshire the number of apprentices has gone up by 80%, when the hon. Gentleman says that there are no jobs for young people? What is going on in his constituency that is not happening in South Derbyshire?

[Bill Esterson]

People in the hon. Lady’s part of the world must be incredibly lucky, because it must be the only place in the country where that is the case.

In reality, every Member knows that the youth unemployment figure has gone over the 1 million mark; that is a fact which everyone here accepts.

[Richard Graham (Gloucester) (Con)]

rose—

[Bill Esterson]

I ask the hon. Gentleman, when he intervenes, to explain why one of this Government’s first acts was to scrap the successful future jobs fund, which the previous Government introduced and Members who are now on the Treasury Bench said they would keep.

[Richard Graham]

I am very grateful to the hon. Gentleman for giving way, after some careful thought. In answer to his question, in my constituency the biggest difficulty with the future jobs fund was that, first, the placements were not real jobs but national service, because they were from the Government or charities; and, secondly, they had no future. They did not, therefore, meet even the definition of their own title: future jobs fund.

The hon. Gentleman has heard about the situation in South Derbyshire. The situation in Gloucestershire is that the number of apprenticeships has risen massively over the past three years and has continued to go up by 20% over the past year, and that youth unemployment has fallen by 150 every month for the past three months. It is not perfect, but things are getting better.

[Bill Esterson]

I cannot decide which of those 14 questions to answer, but as a former banker the hon. Gentleman is in a good position to comment on the financial crisis, which was caused by some of his former colleagues. What he says gives no comfort. He mentions national service, and I went back to the ’80s and ’90s, but he has gone back far further than that, to something that really did not solve any problems for young people.

[Richard Graham]

I am very grateful—

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[Richard Graham]

I shall be very brief, I promise. I have a specific suggestion for the hon. Gentleman—in two questions. First, how many jobs fairs has he organised in his constituency? Secondly, how many apprenticeships have been started in his constituency?

[Bill Esterson]

I speak to people in my constituency all the time, and they tell me just how hard it is to find jobs. I have employed somebody who was on the future jobs fund, and they have been extremely successful, but people who have been out of work for more than six months, whether they have left school, college or graduated from university, find it almost impossible to get jobs.

The reality is that, in this situation, just as in previous decades under previous Conservative Governments, employers are already turning to people who have just left school or college or just graduated; they are not looking at people who have been out of work for a long period. The depressing reality is that we will see another generation of young people consigned to the scrapheap unless this Government take the action that the Labour party proposes in repeating the bankers’ bonus tax.

[Julie Hilling]

I wonder whether my hon. Friend, like me, sees a constant stream of young and older people coming to his constituency surgeries desperate for work. Does he agree that the future jobs fund provided something better than having to work in a supermarket for nothing?

[Bill Esterson]

My hon. Friend gained vast experience of dealing with young people before coming to Parliament, and she has been a strong advocate for them ever since. Her experience is very similar to mine. It is absolutely disgraceful that we have Ministers sitting there laughing at what is happening to young people up and down this country, who cannot get jobs because we have a Government who entered office when the economy was growing strongly—[Hon. Members: “Oh!”]—despite a global economic downturn and a global economic and financial crisis caused by the friends of people like the hon. Member for Gloucester (Richard Graham).

[Gordon Birtwistle]

Will the hon. Gentleman give way?

[Bill Esterson]

Let us hear what the Lib Dems have to say for themselves.

[Gordon Birtwistle]

Would the hon. Gentleman like to comment on the large number of young people who have come from abroad and now have jobs in the UK?

[Bill Esterson]

I am not sure what that has to do with what I was talking about. Perhaps the hon. Gentleman can agree with me that what we need is action from this Government—action to help young people find jobs.

The hon. Member for Dover (Charlie Elphicke), who is no longer here, mentioned several times the fact that the banks are not lending and said that that is the problem, but he forgot to say that the reason the banks are not lending is that they have no confidence in this Government—the Government who have pushed us back into a double-dip recession so that we are now one of only two countries in Europe in that position, the other being Italy. That lack of confidence is why banks would rather shore up their own position—and, of course, pay exorbitant bonuses to their top executives. The banks are not lending to the small businesses that need the money to create the jobs and drive the growth that is needed. Unless the banks start to do that, the Government need to step in.

That is why the proposal from Labour is so important. It is why repeating the bankers’ bonus tax would make so much difference to young people and to this country as a whole. But what did we get from this Government? The cut in the 50p tax rate. Three hundred thousand of the wealthiest people in the country will benefit from a tax cut paid for by the rest of us, particularly the poorest and pensioners through the granny tax. That is the reality of the Government’s proposal, which they are pushing through tonight. That is why we should oppose the Bill.

What I expected was an end to the sort of heckling we have heard from Ministers, who clearly enjoy the prospect of young people being out of work. I would like to think that that is not what they really think. I had hoped for a degree of fairness from the Government—perhaps I was being unreasonably optimistic. There is nothing fair in 300,000 of the wealthiest—

[Mr Reid]

Will the hon. Gentleman give way?

[Bill Esterson]

The hon. Gentleman keeps coming back for more—I am intrigued.

[Mr Reid]

The fair thing in the Budget is that the personal allowance for income tax is being raised by a record amount, taking a large number of low-paid people out of paying tax altogether and giving a tax cut to many more. That is what makes this Budget fair.

[Bill Esterson]

If it were true that it helps the poorest people in our society, perhaps the hon. Gentleman would have a point, but it does not help many of the very poorest and it does not help those young people I was talking about who cannot find a job because the Government will not take action and because they cut the future jobs fund when they first came into office.

What we really needed from this Government was a Budget of fairness. Instead, we got that tax cut. What they should be doing is repeating Labour’s bankers’ bonus tax, which raised £3.5 billion—[Interruption.] Government Members do not have to take my word for it; they can take the word of the independent Office for Budget Responsibility, which they themselves set up. They are even questioning their own organisation’s figures. That £3.5 billion was nearly twice as much as the £1.8 billion raised by the bank levy. The bank levy is a start, but the Government could repeat the bank bonus tax and use the money to get young people back to work and the housing industry going. The temporary VAT cut would help small businesses that cannot get loans from the banks.

I know that people want to get home. [Hon. Members: “Hurrah!”] Always happy to oblige. We have had a Budget for the wealthiest in our society. The Bill gives help to the top 300,000 earners, but does nothing for young people or those out of work.

[Sheila Gilmore]

During the various debates on the Bill, there have been references to the 1980s and the 1970s. Does my hon. Friend agree that there were probably comments like the ones we heard tonight in the 1930s, when people in the south of England said that there was no depression?

[Bill Esterson]

I thank my hon. Friend for her comments —[Interruption.] If the right hon. Member for New Forest West (Mr Swayne) would like to make an intervention, I will happily take it.

My hon. Friend is absolutely right that we are seeing a repeat of what happened in the ’30s, and we have none of the policies necessary to get us out of this situation.

[Geoffrey Clifton-Brown (The Cotswolds) (Con)]

Will the hon. Gentleman give way?

[Bill Esterson]

No, I am not going to take any more interventions; the hon. Gentleman can sit down.

We should be seeing the investment from the bank bonus tax and a temporary cut in VAT. The Bill—[Interruption.]

[Mr Deputy Speaker (Mr Nigel Evans)]

Order. Please—I cannot hear Mr Esterson speak.

[Bill Esterson]

The Bill does nothing to help grow the economy or get us out of the problems we face. The House should vote against it.

Question put, That the Bill be now read the Third time.