Business and the Economy

Brian H. Donohoe Excerpts

Monday 14th May 2012 Commons Chamber

[Vince Cable]

I would be here for much of the afternoon if I listed all of them, but I am sure that my hon. Friend will be familiar with some of the big and high-profile investments, including those in the car industry by companies such as Nissan, Jaguar Land Rover and others, which are important not just in themselves, but because they involve a long-term investment commitment to the UK and bring behind them a large supply chain of small companies.

[Mr Brian H. Donohoe (Central Ayrshire) (Lab)]

But is it not the case that specifically in Scotland, as a consequence of the delays that are being created by the nats, inward investment is faltering?

[Vince Cable]

No doubt there is uncertainty in Scotland because of the political situation there. I have been in Scotland supporting new inward investment. Scotland is participating in the substantial increase in investment that is taking place.

The policies required to sustain this growth of tradeable activities, such as manufacturing and creative industries, lie in aspects of economic policy that are not part of the Queen’s Speech, but they do provide the context to explain why the enterprise and regulatory reform Bill is at the heart of the forthcoming legislative programme.

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[Vince Cable]

I do not see why we should not do that, but I do not think that legislation is required to make that possible. We will certainly see whether it is feasible.

Small businesses also tell us that the fear of employment tribunals is a real disincentive to expanding and to taking on new staff. An employment tribunal is often a costly and stressful process for all concerned. I am fully persuaded that there has to be a balance between the legitimate expectations of workers that they will be protected from abusive employers and the legitimate expectation of businesses, especially small companies, that they can dismiss underperforming staff and not face costly and bureaucratic procedures. That balance is best pursued not through an adversarial system but by fostering conciliation in the workplace.

Our reforms will therefore promote the early resolution of disputes through the greater use of early conciliation and settlement agreements, so that fewer disputes end up in a tribunal. A tribunal is an admission of failure, so we want tribunals to be a last resort.

[Mr Donohoe]

Is the right hon. Gentleman saying, in that respect, that the trade unions have a major part to play, and that people should join them so that they are protected against the legislation?

[Vince Cable]

The unions certainly have a part to play, and I will continue to discuss the proposals with the TUC and affiliated unions, as well as with the employers’ groups.

One area in which good regulation strengthens a market economy is competition policy, so the Bill establishes a new competition and markets authority, bringing together the competition functions of the Office of Fair Trading and the Competition Commission. It will be the principal competition authority with a remit to tackle anti-competitive behaviour and to ensure dynamic and open markets. Competition processes will be faster, with clearer time frames bringing greater certainty and reduced burdens on business.

Fuel Prices

Brian H. Donohoe Excerpts

Tuesday 15th November 2011 Commons Chamber

[Andrew Griffiths]

That point will not be lost on the House.

Something else that will not be lost on the House is the fact that this coalition Government took the bold steps to reduce fuel duty, to bring in the fair fuel stabiliser and to look at what we can do to help rural businesses. That is hugely important.

[Mr Brian H. Donohoe (Central Ayrshire) (Lab)]

rose—

[Sammy Wilson (East Antrim) (DUP)]

rose—

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[Mr Tom Clarke (Coatbridge, Chryston and Bellshill) (Lab)]

I congratulate the hon. Member for Harlow (Robert Halfon). I rise to speak on behalf of my constituents who have expressed to me their deeply held views about the rising cost of fuel.

People are angry in unprecedented numbers right across my constituency. The same is true throughout Britain. At my weekend surgeries there has been a steady flow of constituents who have not held back from telling me what causes the most hardship in their domestic finances. One of the dominant themes is rising petrol pump prices, which are a constant weekly battle for motorists.

[Mr Donohoe]

I understand that my right hon. Friend has an Asda in his constituency. Asda has introduced a price of 128.9p per litre across the whole nation. Surely if the Government are to do anything, it should be to reintroduce universal prices for petrol. He is old enough, as I am, to remember when we had those.

[Mr Clarke]

I am grateful to my hon. Friend. I have a big constituency, which stretches from Cumbernauld right through to Chryston, Coatbridge and Bellshill. The prices at Asda, welcome as they are, do not deal with the problems elsewhere.

These are truly worrying times. We have sluggish growth, rising unemployment, falling confidence in the manufacturing sector and depressed business confidence, so this is no time for complacency from the Government.

By September 2011 the cost of petrol had increased by 17.7% in a year. Our constituents are now paying petrol prices that are the highest in all 27 countries of the European Union. The only country in the world that seems to beat us on motoring taxes is Turkey.

Road Fuel Duties

Brian H. Donohoe Excerpts

Tuesday 13th September 2011 Westminster Hall

[Mr Brian H. Donohoe (Central Ayrshire) (Lab)]

I welcome you to your rightful place in the Chair, Mr Hancock, and I also welcome the Economic Secretary to the Treasury and my hon. Friend on the Front Bench, the Member for Bristol East (Kerry McCarthy), to this extremely important debate. It is also good to see that all parties in the House are, I think, represented here, and I look forward to what they have to say. I particularly want to hear what the Economic Secretary has to say about the high levels of road fuel duties in this country. I also want to put on record my thanks to the Speaker for allowing the debate to take place at this time.

This year, 2011, has been eventful in every sense of the word. It has perhaps been the most financially eventful year in the history of politics. It has been a rollercoaster. We have seen global financial turmoil, and the stock market has fluctuated at a rate that I have never seen before. We are seeing the beginnings of high unemployment levels, along with a rise in inflation, increasing transport costs, and tax changes that I have never witnessed in my time in the House—I have been here some 20 years. The past eight months have delivered a record-breaking run of price rises, those of petrol and diesel being among the most alarming.

Across the UK—there are, of course, highs and lows across the country—the average price of petrol reached a high in May of 137.43p per litre, and an examination of the relevant website just last night showed that the average price just now is not far from that. There is a differential of some 24p per litre between the highest and the lowest price across the country. I remember that when the Labour party was in government there was a near revolution when the truckers blockaded the refineries as a consequence of high fuel prices. Interestingly, we have not seen anything like that since, and I wonder why.

[Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)]

I am not certain from the tone of the hon. Gentleman’s voice whether he wants a blockade of refineries by truckers across the United Kingdom.

[Mr Donohoe]

The hon. Gentleman should know, as should all Members, that I would be the last person in this place to call for a revolution and civil disobedience.

There is absolutely no doubt, however, that the high fuel prices are at the point of driving people out of jobs, which is the most serious aspect of the matter. I shall give an example, which makes me angry, of the desperate situation of a nurse in my constituency. She has had to put up with a wage freeze for the next two years, her pension contributions have gone up, she has to pay double for parking at the hospital in Glasgow where she works, and she has to find £100 extra a month to get to and from work because of the high fuel prices. That proposition cannot feasibly be sustained for too long, but she cannot use public transport because of where she stays and where the hospital is. That problem must be looked at.

Regarding what the Government take per litre, I always remember a case from some years ago of a retailer who was determined to show the breakdown of the price of petrol and diesel. He was told that that was not the form, and the petrol company said that it would no longer supply him, for some obscure reason. When one considers that of the average 135p price of a litre of fuel, 81p is taken, one starts to understand the cost to the individual buying the petrol or the diesel. A good 60% goes on dealing with Government intervention in the form of fuel duty, and there is also VAT. Indeed, 20% VAT increases the price of petrol by 2.5%, putting something like 2.5p on it. In addition, outside of Government intervention in the price, there are the oil companies, and it is time to argue for a windfall tax on their profits. I know that there has already been a tax, which a lot of colleagues are very concerned about in relation to the oil companies’ continued investment, but I believe that the Government should look at the correlation between profit and price.

I have already argued that a significant portion of the price of petrol and diesel in this country is made up of the Government take, and I argue that it is higher than in most other European countries as a consequence of the high level of tax. Is there any opportunity to make the price cheaper? I am sure that the Economic Secretary will argue that in the present climate there is no leeway—no room for manoeuvre—but I suggest that there might be, and I shall come on to that later.

The reason for this debate is obvious: the price of fuel is crippling a great number of the people whom I represent and, I am sure, a great many of those represented by other Members here this morning. The Institute for Fiscal Studies has announced that the living standards of UK families will decline by more than 10% over the next three years, and it predicts that in real terms the typical household income will fall by 3.5% in the year to April, which will be the steepest drop since 1981. We understand that there is little room for offsetting falling living standards by cutting taxes, but the matter must be looked at. The level of tax and duties on petrol and diesel is cutting off the prospects of many struggling families and small businesses, and since I secured this debate I have had dozens of e-mails from small businesses with examples of just what it is doing to them.

The situation is also destroying job prospects, in particular among young people. I have already had a summit in my constituency, attended by the Secretaries of State for Work and Pensions and for Scotland. Youth unemployment is reaching levels that I never thought possible—it is as high as 70% in many areas. That cannot be sustainable and it is not helped at all by the cost of living today, particularly in more rural areas—I see that the hon. Members for Argyll and Bute (Mr Reid) and for Na h-Eileanan an Iar (Mr MacNeil) are present.

[Anne Marie Morris (Newton Abbot) (Con)]

I am delighted that the hon. Member for Central Ayrshire (Mr Donohoe) has brought this important topic for debate. Is he aware that the current Chief Secretary to the Treasury called in 2007 for a rural fuel discount scheme, and so may have a favourable view? Like the hon. Gentleman, I am concerned, because the south-west has a very rural community. Three quarters of the land is agricultural holdings, so a rural discount would be of great benefit.

[Mr Donohoe]

We will have to wait for the Economic Secretary’s response on that point. As an Opposition Member, I am not in a position to give any assurances.

We must consider the problems with the Government’s approach. Although they have frozen fuel tax duty for the next couple of years, we must take into account the fact that the freeze will be more than offset by the rise in inflation. As petrol is always an easy revenue raiser, it is widely expected that the Government will make up their losses, leaving the consumer no better off in the long term.

I will highlight three areas of concern. The first is environmental, the second is economic and the third involves the social impact of the road fuel duty. The removal of the duty differential will affect the green economy. The UK Sustainable Biodiesel Alliance has raised concerns about the Government’s decision to remove the 20p duty differential for biodiesel produced from used cooking oil by April 2012. I ask the Economic Secretary to consider that loss more closely. It does not stack up against the Government’s views on the green economy. Many see the impact of the removal of the duty differential for biodiesel as a disastrous blow for the growth of the green economy. Just outside my constituency is the company Stagecoach, which runs buses on biodiesel. It is highly successful, and particularly popular with youngsters, but it will come to an end if the differential is not maintained. Will the Minister clarify why on earth the Government, whom we have heard are the greenest Government ever, continue to consider it?

On the economic side, we risk the demise of the independent fuel sector. Retail Motor Industry Petrol told me that MRH, the UK’s largest independent forecourt operator, has highlighted the unfair pricing practices used against it by both hypermarket chains and oil companies. That is a concern. In addition, the four big supermarket chains are struggling with their own retail this year due to the downturn, which in turn is placing greater pressure on and compounding the problems of independent retailers.

Such relentless competition has been going on for some years. It is responsible for the closure of around 400 independent forecourts, and it continues. It will lead to a sparse population of fuel retailers, obliging motorists to drive great distances to top up their tanks, which is not sustainable. More than 6,000 garages have closed since 1998, which is a problem, as anybody knows who travels off motorways. Particularly in more rural areas, as I have seen at first hand, running out of fuel because there are no petrol or diesel stations is always a danger.

[Jim Shannon (Strangford) (DUP)]

The hon. Gentleman has outlined the issues relating to road fuel duty and mentioned garages running short. Does he share my concern—I suspect that he does—that it is not only about garages running short but about elderly people in our community? This winter, they will be asking themselves, “Should we use oil, electric, coal or gas?”, but they will be stuck with oil and the cost that that entails. Does he not feel that the Government should consider what help they can give elderly people to ensure that this winter will not be a hard one?

[Mr Donohoe]

The blasé slogan “Either eat or heat” is becoming a reality faced by many of my constituents, particularly the elderly. The hon. Gentleman is right. It is a major concern, and it should concern the Government.

To return to the economic point, the industry should look into the fact that some oil providers supply their own forecourts with fuel at one price while selling the same fuel to a second retailer down the road at a higher cost. Something must be done about that. Anyone who travels two miles along the road from Prestwick to Ayr in my constituency can see it at first hand. Prices at forecourts using the same supplier vary 6p from one end to the other, which should not be allowed. Two-tier pricing is becoming a joke.

[Mr MacNeil]

I hear what the hon. Gentleman says about two-tier pricing, but I am sure that he will sympathise with areas of one-tier pricing, such as my constituency, where all prices are high and the closest cheaper fuel is a ferry ride away. Does he not feel that there has been too much inaction by successive Governments on tackling the problem?

[Mr Donohoe]

I agree entirely. It is interesting to note that Shetland has some of the highest petrol prices in Scotland, although half the United Kingdom’s total oil supply flows through two pipelines there. Another instance is Grangemouth, where the refinery for Scotland is based. The price of fuel there is also among the highest in Scotland. That does not stack up.

[Mr Jim Cunningham (Coventry South) (Lab)]

I was interested by the intervention of the hon. Member for Newton Abbot (Anne Marie Morris), because not far from Newton Abbot is the Devonshire coast. I was down there about 12 months ago or more, and it was amazing to see the number of tankers lined up that were not being unloaded. Does my hon. Friend not think that there might be a case for an investigation into oil companies and hoarding to force up prices? Price is as much an element of the problem as taxes.

[Mr Donohoe]

I thank my hon. Friend for that intervention. I am sure that the Economic Secretary will address that issue when she sums up, along with the points made by other hon. Members.

My third point concerns the social and economic consequences of the situation. Everybody can see that many kinds of damage have been done to consumers and businesses, particularly small businesses. As I have mentioned, the erosion in the number of forecourts is obvious, particularly in rural areas, and it will lead to fuel deserts in many parts of the UK. A vital immunity for low-income families, pensioners and the disabled has been lost. Journeys to fill fuel tanks are longer, increasing carbon emissions needlessly. Consumer choice has been reduced. There are fewer facilities for HGV and van users, as supermarkets do not cater for them. The impact on the UK’s ability to cope with emergencies has also been massive. Perhaps most importantly, jobs and job opportunities are being lost.

[Jim Shannon]

As the hon. Gentleman will be aware, an e-petition is circulating that has some 62,000 signatures at the moment. If it gets 100,000 signatures, we can debate the matter in the House of Commons. Does he not feel that he should encourage people to sign it so that the matter can be debated at length in the House, as it needs to be?

--- Later in debate ---

[Mr Donohoe]

That was one of my conclusions, so it is useful that the hon. Gentleman has made that point. This morning, the Fair Fuel UK campaign e-mailed me, as I am sure it mailed everybody. Like everybody in this room, barring perhaps the Economic Secretary, I signed the e-petition. As a consequence, only 17,000 signatures are now required to reach 100,000. I urge everybody—not just those here but anybody listening to this debate who is concerned about high fuel prices—to sign the petition so that a full debate can be held. This is, after all, only an Adjournment debate. Important as it might be, we need a full debate in the House with the Government leading. I look forward to it.

In conclusion, we must consider the issues that I have highlighted. The Government know that the Labour party opposes 20% VAT, which has helped to push up petrol prices to their current levels. I did not realise until I was preparing for this debate that VAT is put on top of the tax, so the duty is taxed with VAT. If the tax is 50p, 20% VAT is put on top of that fuel duty. The Government should look at that. If, as is being argued, a reduction in VAT is not an option because of the bureaucracy across the water in Brussels, we could consider a reduction in fuel duty to lower the cost of taxation, which, as I have said, is initially some 80p per litre. The Economic Secretary and the Treasury should look at that.

[Guto Bebb (Aberconwy) (Con)]

On VAT, I have been in discussions with a representative from a coach company in my constituency, which has put on hold plans to employ more staff because of the extent of fuel duty. One of the issues that he raised was VAT. He actually argued in favour of a higher rate of VAT for diesel and petrol, because, as a business, he can reclaim the VAT but not the fuel duty. I wonder whether the Treasury has an opinion on that.

[Mr Donohoe]

That is a matter for the Economic Secretary, not me, to address, but I am grateful to the hon. Gentleman for his intervention. A tax increase is being proposed for next January and August, but I would like an assurance from the Economic Secretary that it will not be implemented. The best way to help hard-pressed consumers would be for the Government not to adjust the tax on families, who are already feeling the squeeze as a consequence of the Government’s policy on pay freezes and pension hikes.

We also have to look at the big six energy providers, which recently announced large price rises and bigger profits. The Government must have scope to look at that in order to redress, via a windfall tax, the whole problem of taxation. There is also the issue of the Government’s policy—if it is a policy—to move people from the road to public transport. The Government have just increased the cost of rail travel by 10%, which seems to go against everything that is being argued. Is that policy supported and likely to continue to be supported by the Treasury?

A number of representatives from rural areas are present. More emphasis needs to be put on trying to allay the problems associated with living in the countryside, which are an enormous burden on businesses and the consumer in those areas. I have already mentioned the removal of the duty differential for biodiesel, but the position of that industry needs to be addressed by the Government. It is a growing industry and one that is useful in addressing both public and private transport in my constituency. I have already mentioned the prices set by supermarkets and oil providers, which have to be addressed.

I have two final points. The Government must reduce the tax on petrol. That would increase employment prospects, particularly those of the nurse whom I mentioned earlier, as well as those of people who rely on public transport to get to work. Finally, I am old enough to remember when fuel prices were fixed universally throughout the whole country. A lot of the commodities that were deemed at that time to be essential, such as bread and milk, were all the same price. Given the disparity between the highest and lowest price in this country, will the Government examine the issue so that the disparity is overcome and the price of petrol is not a commodity with which the supermarkets and some of the country’s suppliers play?

[Mr Mike Hancock (in the Chair)]

Thank you, Mr Donohoe. A lot of Members want to speak, but we do not have a great deal of time. Will those Members who speak be careful about the number of interventions they take? Perhaps that way everyone will get in.

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[The Economic Secretary to the Treasury (Justine Greening)]

It is a pleasure to see you in the Chair, Mr Dobbin, into which you seamlessly moved during the course of the debate. First, let me congratulate the hon. Member for Central Ayrshire (Mr Donohoe) on securing the debate. As the shadow Minister, the hon. Member for Bristol East (Kerry McCarthy) said, the House has had a number of opportunities to debate the pressures that the high cost of petrol puts on individuals, families and businesses. The Government continue to view the issue as incredibly important, and the hon. Member for Central Ayrshire was right to raise it. In the time that remains, I will do my best to respond to the points that he raised, and those raised by my hon. Friends. I also hope to provide an update on some of the questions raised about the rural fuel duty discount.

Even though average pump prices fell slightly over the summer, there is little doubt that the cost of fuel remains a difficult issue and concerns many families and businesses across the country. The Government have recognised that for some time, and as hon. Members will know, in the Budget we announced a second rise in the personal tax allowance that aimed to take more people out of income tax altogether. In total, that benefited about 23 million or 24 million people who pay the lower rate of tax on their household income. The Government have worked hard to recognise and tackle the cost of living.

There were extensive debates in the House and the Finance Bill Committee about the cost of fuel and the Government’s plans to support motorists. I welcome the opportunity to revisit those issues, but before I address some of the points raised today I want to explain why the Government acted as they did in the Budget, and set out why the approach proposed by the Labour party is not only illegal but unworkable. Perhaps if I explain to the Chamber why I believe that to be the case, we can put the issue and the alternative proposals to bed once and for all, and perhaps I can save Labour Members from continuing with the hole they are digging in pressing for them, although that is obviously up to them.

The coalition Government recognise that motoring is an essential part of everyday life for many households and businesses. The cost of fuel affects us all and the Government recognise that the rising price of petrol has become an increasingly significant part of day-to-day spending. We know that high oil prices are causing real difficulties in trying to ensure that motoring remains affordable, and it is important that when shocks such as the steep rise in the price of oil occur, a responsible Government are able to listen, consider and respond.

The hon. Member for Bristol East mentioned the fuel duty escalator. That was introduced in the 2009 Budget by the previous Government and involved seven increases in fuel duty. The previous Government had planned for an above-inflation increase at the start of April—that was the position we inherited, and we had to make a decision about whether to go ahead with the pre-planned rises left by the previous Government. Had we gone ahead with those rises, pump prices would, on average, have been 6p per litre higher than they are currently. I take on board many of the points raised by the hon. Member for Central Ayrshire about the impact of high petrol prices, but he must recognise that had we done nothing, that extra 6p would only have created more pain for motorists and businesses. On top of that—let us be clear—the plans that we inherited would have introduced further above-inflation increases in duty in 2012, 2013 and 2014. On taking office, we had to come up with a plan to support motorists, because the previous Government did not have one—it was the exact opposite.

From the start, the coalition Government have been actively looking at how we can ease the burden on motorists, although that is incredibly challenging given the constrained and difficult fiscal situation that we inherited. One of the first things we did, as the hon. Member for Coventry South (Mr Cunningham) mentioned, was ask the Office for Budget Responsibility to look at how high oil prices flow through to impact on the economy and try to understand that. As the hon. Gentleman pointed out, we were concerned to understand the impact on businesses and jobs. That was part of our work in looking at how we could construct a fair fuel stabiliser, which I will come to in a moment.

As part of the Budget, we finally announced our plan to ease the burden on motorists with a £1.9 billion package. The Government listened to hard-pressed motorists and businesses and acted. What did we do? We acted by cutting fuel duty. The hon. Member for Central Ayrshire clearly wants us to go further in cutting fuel duty, but he should at least be able to welcome the fact that we have already cut fuel duty by 1p a litre from 6 pm on Budget day. We acted by cancelling the previous Government’s plan for a fuel duty escalator for the rest of the Parliament. We acted by introducing a fair fuel stabiliser that will better share the burden of high oil prices between motorists and oil companies, so fuel duty will increase by inflation only when oil prices are high.

[Mr Donohoe]

Does the Minister accept that there is a correlation between the duty and the increase in VAT? Indeed, the cost of the VAT increase to the motorist was 2.8p a litre. If the Government are to do anything to redress the imbalance, it is that amount, not the 1p that she talks of, that should be taken from the price, because the consequence of increasing VAT to 20% has been an increase in the price to the motorist of 2.8p.

[Justine Greening]

I take the hon. Gentleman’s point. The issue was raised of VAT being applied to the total price of fuel, including fuel duty. For clarification, that is in line with EU rules. That is the reason why that approach is taken. However, I will say two things to the hon. Gentleman. First, we have introduced a £1.9 billion package to support motorists. Secondly, I have heard a number of Opposition Members bemoan the increase in VAT, but they have had several chances in the Division Lobby to vote against that VAT rise and they have not taken them. I would be happy for any hon. Member who voted against the VAT rise to intervene on me now, but having checked Hansard—[Interruption.] Let me be clear that I am not referring to the Scottish National party contribution to this debate, because of course it called the vote. I think that both I and the hon. Member for Na h-Eileanan an Iar (Mr MacNeil), who represents the SNP, would recognise that the Labour party abstained in that vote and did nothing, despite its words. It never followed them up with action. Those Members owe it to their communities to be a little more frank about the fact that they waved through the VAT increase themselves.

Scotland Bill

Brian H. Donohoe Excerpts

Tuesday 21st June 2011 Commons Chamber

[Stewart Hosie]

It has to be initially to get this kicked in. At that point, the Scottish Government are rightly responsible for their revenue raising and their tax spending within it. That is normal, grown up and quite appropriate.

[Mr Brian H. Donohoe (Central Ayrshire) (Lab)]

I ask a simple question: what does the hon. Gentleman mean by “initially”?

[Stewart Hosie]

A permanent reduction for corporation tax to be devolved and taking responsibility for the income we raise to pay for the services we have.

--- Later in debate ---

[Stewart Hosie]

It will not be a reduction because we will have the corporation tax yield, which is comparable to the reduction in the block. It is the same amount of money initially and we take responsibility thereafter.

[Mr Donohoe]

rose—

[David Mowat]

rose—

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[Stewart Hosie]

I suspect that any MP trying to take a carry-out through airport security would immediately be stopped.

The devolution of alcohol excise duties would also enable the Scottish Government to implement a revised alcohol duty structure to offer greater protection to the competitive position of Scotch whisky, something we have tried to do on several occasions in a number of past Finance Bills. On 12 May 2009, the vote on alcohol duty took place at half-past midnight. We were trying to implement a fair rate of duty—which we can achieve through the devolution of excise duties—so that alcoholic beverages were taxed on their alcohol content, and on no other spurious measures. Interestingly, five Conservatives managed to vote with us, yet 268 Labour Members voted against, thereby maintaining the unfair level of duty on Scotch whisky. I am sure the hon. Member for Paisley and Renfrewshire North (Jim Sheridan) is sincere in his view, but it does not stand the scrutiny of the recent voting record.

The devolution of excise duties ought to be handled through the devolution of additional powers as described in the amendment, because alcohol duty is levied on all products consumed in the UK irrespective of their country of origin. As a result, the UK Exchequer collects duty on Scotch whisky only if it is consumed in the UK, as exported whisky is not liable for excise duty. Similarly, imported products such as spirits produced overseas are liable for duty when entering the country to be sold in the UK market. We seek to devolve this power, and the Scottish Government seek the responsibility to vary the rate of duty levied on products in Scotland and to implement a more streamlined and efficient system of alcohol taxation that better targets rates of duty to combat binge drinking and excessive consumption of cheap alcoholic products, and that supports a fairer and less discriminatory system for premium products such as Scotch whisky.

[Mr Donohoe]

Will the hon. Gentleman at least give credence to the fact that over a great number of years previous Governments held back from imposing higher taxes on Scotch whisky, along with all other spirits, and that as a consequence the level playing field he seeks is close to being achieved?

[Stewart Hosie]

I am prepared to recognise that duty did not rise for a number of years, but that is not the point I am making. My point is that alcohol taxation is unfair because it is based on different types of alcoholic drink, and not entirely on alcoholic strength.

[Mr Donohoe]

But it is getting to that point.

[Stewart Hosie]

It is no such thing, as I am sure the hon. Gentleman’s contacts in the Scotch whisky industry will confirm.

There is a strong social case for the devolution of alcohol duty, not least because there is clear evidence that, for alcohol, price is a driver of consumption. There is strong evidence from numerous surveys in Europe, America, Canada, New Zealand and elsewhere that levels of alcohol consumption in the population are closely linked to the retail price of alcohol. As it becomes more affordable, consumption increases, and as the relative price increases, consumption falls.

We, and the Scottish Government, are committed to introducing a minimum price for alcohol, and gaining control over the excise duties would provide an additional mechanism to address excessive alcohol consumption. That would help to reduce the annual cost of alcohol misuse in Scotland. Devolving excise duty would enable a future minimum price per unit to be established within the excise system. Under the current system, the introduction of a minimum price is estimated to generate additional revenue for retailers, not the UK or Scottish Government. That was the argument the Labour party made in the Scottish Parliament. Devolving excise duty for alcohol would therefore result in all the additional revenue from increasing the price of low-cost alcohol products accruing to the Scottish Government, and those revenues could then be reinvested in public services in Scotland. The case for devolving alcohol duties is very strong indeed.

Oral Answers to Questions

Brian H. Donohoe Excerpts

Tuesday 21st June 2011 Commons Chamber

[Mr Hoban]

That is why we introduced Project Merlin. We have also taken other measures to encourage funding for small businesses. The banks have set up the business growth fund, which can invest capital in medium-sized businesses to help them grow. We have approved arrangements for business angels to invest more in small and medium-sized businesses. These are the measures we need to take to introduce a range of available finance so that small businesses and private sector employment can continue to grow.

[Mr Brian H. Donohoe (Central Ayrshire) (Lab)]

When a constituent comes to my constituency surgery or writes to me, and I write to the Treasury because that is where their question should be answered, why, after a long process, is the Treasury now saying that I will not get a letter in reply because a circular was sent some months ago? The Minister now answering is the one who is responsible. Why is that practice happening in the Treasury?

[Mr Hoban]

rose—

[Mr Hoban]

Indeed. If the hon. Gentleman will let me have details, I will look into the matter for him.

[Mr Donohoe]

On a point of order, Mr Speaker. In view of the unsatisfactory nature of the reply I have just received, I will seek a debate on the Adjournment.

[Mr Speaker]

I am extremely grateful. Under the procedures of the House, as colleagues are aware, we must proceed to the next question.

Equitable Life

Brian H. Donohoe Excerpts

Wednesday 4th May 2011 Westminster Hall

[Mr Brian H. Donohoe (Central Ayrshire) (Lab)]

It is good to see you in your place, Mr Meale. I thank Mr Speaker for allowing me to participate in this very short debate on a subject about which the Minister has corresponded with all Members, and which has been a problem since 1992, the very beginning of my time in this place. It has been a problem all those years, and no Government have addressed it as my constituents deserve, a fact on which I will concentrate in my speech.

Guidance has been given to Members. The Government first gave it to us in a round robin letter from the Minister on 15 November, and an update was given on 26 January this year indicating that things were moving apace and that solutions and a process had been found. I am after an update from him and the Treasury on where we are at and when the first payment will be made to those who seek and deserve compensation.

There is absolutely no doubt that there was foot-dragging during the 13 years when we were in government. I participated in debates on the other side of this Chamber and was critical of the Government of the day. I also remember occasions when the Minister was on this side of the Chamber, making all sorts of promises to the public that were most effective at the time. That is what I will concentrate on.

The place to look in order to understand a party’s position on any given subject is its manifesto. The Liberal Democrat manifesto referred to

“Meeting the Government’s obligations towards Equitable Life policyholders who have suffered loss. We will set up a swift, simple, transparent and fair payment scheme.”

The Conservative manifesto said:

“We must not let the mis-selling of financial products put people off saving. We will implement the Ombudsman’s recommendation to make fair and transparent payments to Equitable Life policy holders, through an independent payment scheme, for their relative loss as a consequence of regulatory failure.”

That was in the Conservative party manifesto for last year’s general election. Having read those, I would have thought that measures would be in place by now. We are a year into the coalition Government, and I understand that not a single payment has been made. Perhaps the Minister will update us on when it can be expected.

The Conservative manifesto says “mis-selling”. It is a somewhat unfortunate choice of phrase, as many pensioners feel that they were mis-sold an election promise by the Conservatives. That is a fairly serious accusation. I get letters in my mailbag almost weekly—34 of my constituents write to me regularly on the subject—and I am sure that that is repeated across the land and that every Member of Parliament is being written to by those most affected by the mis-selling of that fund.

More recently, the hon. Member for Southend West (Mr Amess) said in the Chamber:

“I know that the Treasury team are working extremely hard to try to balance the books, given the terrible legacy that we were left, but I must tell the Deputy Leader of the House that I am worried about the promises that were made before the general election. Some of my elderly constituents feel that we have not honoured them.”—[Official Report, 5 April 2011; Vol. 526, c. 987.]

That is a Conservative speaking. There is concern across the House about what this Government are doing, and it must be considered.

What are the problems, and how are the Government and the Treasury addressing them? Although they made that promise, they almost immediately excluded some 10,000 elderly people from the compensation scheme because they took out policies before the September 1992 cut-off date, which seems unfair. Those trapped policyholders arguably suffered the same maladministration as the others. We were told that they would be paid 100% compensation, but they will not receive anything. That should, indeed must, be addressed.

I must concede one thing—I have already done so publicly in this place, during the last debate on the subject. Investing in anything involves taking a gamble. People must understand that even a pension scheme, which could be described as a gold-type investment, can never be expected always to go one way. It is always possible to lose money. I have seen that at first hand. At the same time, we are talking about investments made when the Government of the day—and particularly one Minister, Eric Forth—said that they did not want any form of regulation whatsoever governing the finance sector. If we trace back the history, that is where the problem was first created. There should have been regulation. The whole fund was tied up in a system that had no regulatory body to examine what was going on.

It is simply wrong for the Treasury to have revised the amount of money that will be available from the public purse for the payment scheme. It promised total payment—that is what was said and understood. That is what was in the correspondence I received. I was challenged at the hustings during the run-up to the last election, and that was what was read to me as the policy of this Government. They made that clear to those constituents of mine who were concerned about the question.

Even to suggest that the money is not being paid as intended due to this country’s financial situation is absolute nonsense. Anyone could see that the global financial crisis would affect Government thinking and that the Opposition of the day were being foolhardy in making the promises they made. It almost indicated—to some of my constituents, at any rate—that there was no chance that the Tories would form an Administration. That is part of the reason why they were in a position to make such promises, which still have yet to be met.

The Minister said in a written answer:

“The Government have accepted all the parliamentary ombudsman’s recommendations in full. The Government’s ambition is to start making payments in the middle of this year.”—[Official Report, 31 March 2011; Vol. 526, c. 472W.]

Can the Minister indicate or commit to a date when that will start to happen? Who will first receive the moneys outstanding?

There is no doubt whatever that, just as with previous Governments, there has been delay after delay. It is immensely frustrating, particularly for those very elderly people who have been deprived of the pension they expected from the company. The matter has been addressed by ombudsmen and all sorts of courts, yet even today no money has been paid. I am looking for an update from the Minister, and I expect to hear something this afternoon.

[Neil Parish (Tiverton and Honiton) (Con)]

I do not know that I necessarily thank the hon. Member for Central Ayrshire (Mr Donohoe) for how he has introduced this debate. For 13 years, the Labour Government prevaricated about doing anything about Equitable Life. To be blunt, many policyholders believed that it was the Labour Government’s policy to wait long enough that they would not have to pay out to so many people. He has stood up and criticised what we as a Government are trying to do to put that right, yet his party lived through probably the most profligate times that any Government ever lived through and did absolutely nothing about the problems with Equitable Life.

I sat on a European inquiry on this issue, because Equitable Life sold policies not only in this country but in the Republic of Ireland and Germany. The problem was that it was mis-selling—it mis-sold the product by saying that these were with profits insurance policies when, of course, the profits it predicted were never going to be met. Every time we inquire into the matter, we find that all the people who used to manage Equitable Life have mysteriously disappeared and that the new bunch of people running it had no knowledge of what was happening before. We never seem to be able to pin down exactly who was to blame among all the people who were valuing those policies.

The whole issue now rests on the question whether the policies were mis-sold and whether the company acted outside the legislation. I say to the hon. Gentleman that the previous Government had plenty of time to look for and find a way of compensating those who had lost money. Why did they refuse to accept the ombudsman’s report? Why did they go to virtually every court they could find to avoid paying any compensation?

[Mr Donohoe]

I should like the hon. Gentleman to address one issue. What was in his party’s manifesto and why does he think that this Government have acted under the auspices of that particular entry in the manifesto?

[Neil Parish]

The manifesto referred to compensating people who had policies with Equitable Life and lost money, and what we are now introducing is a package of measures to compensate them. Whether we can compensate them 100% or not is a difficult question, especially in the financial circumstances that we inherited from the previous Government. I made the point at the beginning of my speech that the hon. Gentleman’s party had the opportunity, when tax receipts were flowing into the Treasury and when there was plenty more money sloshing around in the economy, to make those payments. That was a much less painful time than now, when we have to take into account the financial situation in which we find ourselves. The Minister will explain exactly what we are doing.

I agree with the hon. Gentleman that people want to know exactly when they will receive compensation. I hope that we will hear about that from the Minister. Many of us would like to see as much compensation as possible. In fact, we would like to see greater compensation, but we have to realise that the funds are competing against everything else for which the Government have to find money, at a time when we have inherited such incredible debts. I am sorry to say it, but I find it almost unbelievable that the hon. Gentleman can stand up and accuse this Government of not honouring their pledges when, as I have said, the previous Government had plenty of time to do something about the issue. What we have done is to put together a package of measures that will find ways of compensating people.

This is about when and on what date the policies were sold. Some of those issues are sensitive and I imagine that people who bought policies before 1992 are concerned, because they were also mis-sold policies. The issue has been painful for many of my constituents and many others throughout the country because of the money they have lost, but the one thing we have failed to talk about in this debate is that we have to be absolutely certain that this will never happen again. Lessons must be learnt, because this has caused so much suffering for people who were putting money away for their retirement. Do not forget that all Governments—Conservative Governments in particular—always want people to save for their retirement in order to look after themselves. In this case, people lost money, which is to be regretted.

I am happy to have spoken in the debate and will be interested to hear what the Minister has to say. The coalition Government have introduced a package of measures that will give people compensation after 13 years of a Labour Government who failed.

--- Later in debate ---

[The Financial Secretary to the Treasury (Mr Mark Hoban)]

I congratulate the hon. Member for Central Ayrshire (Mr Donohoe) on securing this debate. It is the first time for some time that we have had the opportunity to discuss Equitable Life, and I am grateful for the opportunity to update Members on the progress that we have made on resolving the issue.

The hon. Gentleman was right to highlight that some time has elapsed since these problems first arose. A number of reports that established that maladministration had taken place had been published, but the previous Government failed to act on them. When the ombudsman published her report in July 2008, we immediately accepted her recommendations and her findings of maladministration. We were clear that compensation should be paid for relative loss, but we also accepted the second leg of that recommendation, which was that it had to be subject to the constraints of the public purse. We have been clear throughout. If the hon. Gentleman looks at the speeches that I have made in this Chamber and in the main Chamber on Opposition day motions, he will see that we have been explicit about the two legs of the ombudsman’s recommendations. As my hon. Friend the Member for Tiverton and Honiton (Neil Parish) has said, if the issue had been resolved earlier, perhaps policyholders would have been in a better position than they are now.

I remind the hon. Member for Central Ayrshire that, while we accepted the ombudsman’s findings on the day on which they were published, Labour Ministers waited until the January of the following year before accepting only some of her recommendations, and they were challenged on that in court.

The hon. Gentleman asked when we are going to make payments and claimed that there had been a series of delays. However, I made it clear in the House last July, when I made an oral statement on the day on which we published Sir John Chadwick’s work, that we would start to make payments before the end of the middle of this year—that is, before the end of next month—and it remains our intention to do so. I am not sure where these mythical delays have emerged from, because over the course of the past nine months it has been clear when we expected to start to make payments.

[Mr Donohoe]

Will the Minister be specific and say what the payments will be and when they will start to be made?

[Mr Hoban]

As I have said, we will start to make payments before the end of next month. I will address the structure of the payments and the next formal step in the process later in my speech.

We have been clear from the date on which the coalition was formed that we want to end the plight of policyholders. Indeed, one of our first pledges—it is in our coalition agreement—was to implement the ombudsman’s recommendation to make fair and transparent payments to Equitable Life policyholders for their relative loss as a consequence of regulatory failure. We have kept that promise. In the year since we came into government, we have made significant progress towards achieving that ambition. Last July, we introduced the Equitable Life (Payments) Act 2010, which gave the Treasury the authority to incur expenditure when making the payments. I am grateful to both Government and Opposition Members for supporting the 2010 Act and for allowing it to receive Royal Assent to an accelerated timetable. That has enabled us to press forward with our preparations for making payments as soon as possible.

We published Sir John Chadwick’s advice on the financial losses sustained by policyholders, as well as the calculations of the actuaries, Towers Watson, of the relative loss figure. At that time, I invited all interested parties to make representations to the Treasury so that they could be considered as part of the preparations for the spending review. We considered the full range of those representations, including those from individual policyholders and lobby groups, such as the Equitable Members Action Group and Equitable Life Trapped Annuitants, and from Equitable Life itself. After final refinements of the calculations by Towers Watson, we quantified the relative loss at £4.1 billion. That is based on the Government’s full acceptance of the ombudsman’s findings of maladministration. That is more than 10 times the figure arrived at through Sir John Chadwick’s methodology, which was based on the previous Government’s limited acceptance of the ombudsman’s findings. In last October’s spending review, we announced that approximately £1.5 billion would be made available for payments to policyholders through the scheme. That is perhaps not as much as we would have liked but, as the ombudsman herself has acknowledged, the impact of the scheme on the public purse has to be taken into account.

It is also important to note that, even in the midst of last year’s understandably constrained spending review, we still found a way to cover the losses of the with-profits or trapped annuitants in full. That was achieved by paying their losses through annual payments that reflected the structure of their policy. Those policyholders were particularly vulnerable to their losses because they were unable to move their funds elsewhere or mitigate the impact of their losses through employment. They were also generally the oldest policyholders.

The hon. Member for Central Ayrshire raised his concerns about the exclusion of those with-profits annuitants who purchased their policy before September 1992 from the scheme. He is not the first to do so, but this is an important opportunity to restate what I have said in correspondence to a number of hon. Members and what I said in the Committee that considered the 2010 Act. In her report, the ombudsman recommended that the aim of the scheme should be

“to put those people who suffered a relative loss back into the position that they would have been in had maladministration not occurred”.

With-profits annuitants who bought their policies before September 1992 did so before maladministration could have affected their investment decision. The first returns that the ombudsman found were affected by maladministration were those of 1991, which would not have influenced policyholders’ decisions until September 1992. Once a with-profits annuitant had purchased their policy, they did not have the option to move it elsewhere. Therefore, the correct question is not what these policyholders would have received if they had invested in a different company or had transferred their policies at some date after September 1992, but how their Equitable Life policy would have performed if maladministration had not occurred. Calculations by Towers Watson show that, if there had been no maladministration, those policies would not have performed better than they actually did, so no loss has been suffered.

For pre-September 1992 with-profits annuitants, the reduction in the levels of annuity payments is largely due to a combination of circumstances, such as poor investment market performance and the fact that early annuity payments were artificially high due to the structure of the product and over-bonusing. I understand that this is a complex issue, and I have happily engaged in correspondence and discussions with hon. Members on it. However, I hope that my explanation about the situation facing with-profits annuitants clarifies our position.

I want to move on to the principles that have guided our decisions on Equitable Life. At all times we have sought to ensure that our choices have been both fair and transparent. In that vein, we set up an independent commission to advise on the distribution of funds to people with policies other than with-profits annuities. The commission reported in January and we accepted the principles it recommended: that we should introduce a pro rata allocation of funding in proportion to the size of relative losses suffered; that we will take a single policyholder view wherever that is fair and practicable to offset relative gains against relative losses for individuals with more than one policy; and that we should announce a minimum amount in the region of £10 beneath which payments should not be made. The reason behind that decision is that administering payments below that amount would be disproportionate to the administrative costs of making them in the first place. Subject to practical constraints, payments to the very oldest policyholders and the estates of deceased policyholders should be made an absolute priority. I want to make that clear to hon. Members today.

We are working on translating those principles into a quick and efficient payment scheme. That work is nearly complete and, as promised during the debates on the 2010 Act, I will be placing a scheme design document before Parliament imminently. In that document, hon. Members will find details on how the new payment scheme will work, including information on who will receive payments, how those payments will be calculated and how they will be made.

We have appointed National Savings and Investments as the scheme delivery partner to oversee that process. I am confident that its experience in processing large numbers of payments makes it the best choice for this important and complicated role. To reduce the complexity of the scheme, we announced in the spending review that payments will be both tax-free and should not affect eligibility for tax credits. That is both fair and sensible, and I know that hon. Members here today will welcome it. A statutory instrument introduced under the 2010 Act to put that into effect is currently before Parliament, and it will be debated shortly.

I want to make one final point to set policyholders’ minds at rest. Policyholders do not need to do anything to claim their payments. Those operating the scheme will contact them in the first instance. A website and call centre will be up and running for the duration of the scheme to guide policyholders and address any queries they may have.

[Mr Donohoe]

Will the Minister tell me for how long the scheme will be up and running and whether payments will be made over a three-year cycle?

[Mr Hoban]

The hon. Gentleman has raised an important point. We need to distinguish between two groups. The first is the eligible with-profits annuitants. Payments will be made to them over the lifetime of their policy. That has enabled us to extend the cost of this beyond the spending review and therefore to spend more on resolving the problem than would otherwise have been the case. Other policyholders who have suffered losses and are eligible for compensation will receive a single payment at some point over the next three years, with priority being given to the oldest policyholders and the estates of deceased policyholders. That is to ensure the cost of the scheme is manageable and that the scheme is deliverable in the period.

We have spent a lot of time making sure that the administration and delivery of the scheme works as effectively and as quickly as possible. However, I do not want to give any false promises to people. We said that we would start to make payments before the end of next month. It is a three-year scheme for people, apart from for those who are with-profits annuitants. For with-profits annuitants, payments will be made over their lifetimes, which is the right way to maximise the amount of money available to policyholders given the economic situation that we inherited.

I look forward to hon. Members’ comments on the scheme design document, which aims to be as simple and clear as possible both for policyholders and for those who take a more detailed interest in the technical details of the scheme design. The scheme holds out a prospect that policyholders will receive compensation, and it brings to an end a long-running saga that has not reflected well on how such issues are handled. Of course, as my hon. Friend the Member for Tiverton and Honiton has rightly said, we need to ensure that people have confidence to save for the future. That is why, as part of our reform of financial regulation, which focuses principally on the lessons to be learned from the financial crisis, we are introducing a dedicated financial conduct regulator—the Financial Conduct Authority—which will be responsible for all aspects of the regulation of financial conduct. That will help to strengthen consumer confidence in this area, and we hope will ensure that a problem on the scale of Equitable Life does not happen again.

Scotland Bill

Brian H. Donohoe Excerpts

Monday 14th March 2011 Commons Chamber

[Stewart Hosie]

It is a pleasure to serve under your chairmanship on this second Committee day, Mr Evans. I look forward to what I hope will be a detailed and constructive debate. Given that a Treasury Minister is present, we may receive some intelligent, enlightening and instructive answers from the Government. I am intrigued to see the Exchequer Secretary to the Treasury, along with the Secretary of State and a junior Minister, the Under-Secretary of State for Scotland. Obviously the Government decided to bring in the big guns to do the difficult stuff. I am sure that that will help over the next two days.

There are four taxes that we wish to be devolved: corporation tax, fuel duty, the aggregates levy and air passenger duty. I shall touch on the first two briefly, and say a little more about the aggregates levy and air passenger duty later.

The Bill has been considered by the Committee in the Scottish Parliament. As Ministers know, there was much agreement on many matters, but there was disagreement on a number of others, including corporation tax. I think it useful for this Committee to understand the minority view of the Scottish Committee, which said:

“A major failing of the Scotland Bill is that it does not devolve control over corporation tax, one of the most important economic levers available to a Government pursuing economic growth. In many countries corporation tax has been the key component of a strategy to increase competitiveness and improve growth. Without this power, however, Scotland is missing out on the opportunity to give itself a competitive edge… This situation could soon be worsened by the UK Treasury's consideration of devolving corporation tax to Northern Ireland. The CBI Northern Ireland has stated that cutting corporation tax in Northern Ireland would have a ‘transformational’ impact on the Northern Irish economy—giving an immediate boost to the profits of businesses and generating 90,000 jobs. With control over corporation tax Scotland would be in a position”

to do much the same. The very fact that the United Kingdom Government were taking a similar approach to corporation tax would justify that position, the Committee said.

As Scottish and other Members will know, a significant body of business opinion backs the devolution of corporation tax—

[Mr Brian H. Donohoe (Central Ayrshire) (Lab)]

Name him.

[Stewart Hosie]

I did not want to take up too much time by listing all the business people in annexe A of the Committee’s minority report, but I shall be happy to do so if the hon. Gentleman wishes.

It is not simply the business community that has backed the devolution of corporation tax. A man who is hugely respected across the political divide in Scotland is Campbell Christie, the former leader of the Scottish Trades Union Congress. He has said:

“Higher growth will create jobs and generate more tax revenues to protect frontline public services, as well as repaying the high level of debt. To achieve this, Scotland's government need greater economic powers. But the Calman legislation does not meet this need.”

[Stewart Hosie]

I did say that there was significant support in the business community, and I stand by that. The one thing I will not do in the next two days is engage in the politics of the Committee report. I want to consider its recommendations, and indeed identify proposals to which there was opposition. There is certainly significant business support for the devolution of corporation tax, which will enable the right decisions to be made to engender economic growth.

[Mr Donohoe]

Will the hon. Gentleman give way?

[Stewart Hosie]

Not at the moment.

Campbell Christie also said:

“I firmly believe a Scottish government equipped to vary all taxes—including corporation tax… would be able to tackle the serious difficulties we face.

I do not want a tax regime to be imposed on Scotland that is utterly unfair and inadequate to meet the challenges we face. I hope Scotland’s politicians will join me in opposing these unfair proposals.”

I hope that Members throughout the House will note carefully what Campbell Christie said about the devolution of that tax.

[Stewart Hosie]

No, it is not, and if the hon. Lady looks at later amendments she will find that an entire series of them is related to the commencement powers, precisely to ensure that the right things are done at the right time, with the agreement of everybody involved. We will consider that, and I hope the hon. Lady is still present in the Chamber when we do so.

Two specific corporation tax issues relate directly to the Bill’s provisions. Existing provisions allow assigned revenue from a share of income tax—one large tax and a chunk from that, and lots of small measures. It would be much better if there was a balanced basket of taxes, so there was not an over-dependence on, and therefore a potential volatility from, having such a large amount of assigned revenue from a single tax. It would also be preferable if there was a personal tax and business taxes, so that they could be offset. It would also, of course, be preferable to remove the perverse disincentive under the Bill in respect of any future Scottish Government reducing income tax. Let us imagine that a Government decided that, for whatever reason, such a measure might be sensible to stimulate growth, but the Scottish Government took the hit in reduced revenue yield from income tax while the UK Government took the benefit of increased corporation tax. The effect of having only a large personal tax, and not a significant business tax, is that it unfairly and unnecessarily removes the number of economic or fiscal levers open to the Scottish Government. That is an important point.

[Mr Donohoe]

I had experience of the shipyards in the ’60s and ’70s, and we came upon something called transfer price fixing, whereby companies in Scotland—and elsewhere—would fiddle with the prices, such as those charged for gear boxes at Linwood. How would we overcome that in practice, because I can foresee exactly the same dangers arising under corporation tax?

[Stewart Hosie]

The hon. Gentleman makes a very interesting point, which relates to what the Government say. They believe in tax competition, as do I, but we must avoid unnecessary tax or regulatory arbitrage not just within the UK but between the UK and other countries. There is a balance to be struck between proper tax competition, which is legitimate and fair and proper to stimulate growth, and unnecessary changes simply to get a quick short-term fix in terms of the arbitrage, which would be unhelpful. That highlights the analogy with price fixing that the hon. Gentleman drew, and he is right to be conscious of that.

We rehearsed the arguments about fuel duty at some length in our debate on the Supply day motion a few weeks ago, so I do not intend to go into that in considerable detail, but I will go into it in some detail.

--- Later in debate ---

[Stewart Hosie]

Not at the moment.

Before I get too distracted, let me return to the Bill. The whole point about this amendment and our seeking the devolution of fuel duty powers is that we are not doing this for its own sake. Everyone understands the difficulty, as we have raised it many times, so this is about action. If the UK Government will not act, it is perfectly reasonable for the powers to be devolved so that a Scottish Government can act.

The two significant taxes dealt with in this first group are the aggregates levy and air passenger duty. In written evidence to the Scottish Affairs Committee, Professor Iain McLean said:

“I am not persuaded by the UK Government’s reasons for rejecting Calman’s other two tax devolution proposals, namely Aggregates Levy and Air Passenger Duty. As Scottish Ministers have correctly pointed out, the litigation which is given as a reason for rejecting the transfer of Aggregates Levy was already in progress when Calman reported. If Scotland is willing to take any revenue risk arising from that litigation, it should be allowed to.”

Likewise, the fact that the UK government intends to convert air passenger duty into a ‘per plane’ duty argues for, not against, devolving it. The principle of subsidiarity implies that the Scottish Government, not the UK Government, should decide how to tax flights originating at small Highland or island airports. Airports don’t move. They are a very suitable devolved tax base.”

On aggregates duty, Professor McLean said:

“The shape of landfill tax is obviously complementary to that of (any successor to) Aggregates Levy.”

Landfill tax is being devolved, so the approach being taken here is rather illogical. It is also a key recommendation of the Scottish Parliament’s Committee that aggregates tax is devolved. The final Calman commission report said:

“The Commission has recommended that a number of “green taxes” (Air Passenger Duty, Landfill Tax and the Aggregates Levy) be devolved. As well as helping to increase the financial accountability of the Scottish Parliament, control of these taxes will provide important policy levers in relation to environmental issues, allowing the Scottish Parliament and Government further options in determining policy.”

That makes perfect sense. Excluding two of the three taxes in that “green taxes” category not only makes a mockery of the Calman report, but, more importantly, decreases financial accountability and removes what Calman called “important policy levers”.

[Mr Donohoe]

I have campaigned on this issue for some time, as has the aviation group within the House. We have asked for this tax to be looked at because it is just ridiculous, given what is happening in Europe. If the tax were to have been devolved, the Government’s position was that it should be devolved, and there was to be a variant—one would presume that that is why the hon. Gentleman is asking for the tax—where would the money come from for any downward variation?

[Stewart Hosie]

I shall answer that when I come to air passenger duty, because it is a perfectly valid question. In general terms, if any Government chose to increase a tax they would see an increase in yield or behavioural change. Likewise, if they chose to decrease a tax they would either see a reduction in yield or behavioural change. In the case of corporation tax, all the evidence in country after country shows that when business taxes have come down, business tax yield has increased. Those judgments would need to be made depending on the tax, the decision and the part of the economic cycle.

--- Later in debate ---

[Mr Donohoe]

I beg to move, That the clause be read a Second time.

[The Chairman of Ways and Means (Mr Lindsay Hoyle)]

With this it will be convenient to discuss new clause 2 —Regional members of the Scottish Parliament—

‘(1) The Scotland Act 1998 is amended as follows.

(2) In section 81, after subsection (2), there is inserted—

“(2A) No provision shall be made under subsection (2) for any allowances for representative work in any constituency or region by a regional member in a registered political party or a group of such regional members; and no allowances may be made for offices or staff or related expenses incurred by such members other than in connection with or at the Parliament’s place of meeting or in connection with a committee meeting.

(2B) Any allowances paid to regional members in a registered political party shall be founded on the assumption that they are representatives of that party from the relevant region and not from any single constituency.”.

(3) In Schedule 3, after paragraph 2 , there is inserted—

2A The standing orders shall include provision for withdrawing from a regional member in a registered political party any or all of his rights and privileges as a member, including any allowances, if he is found to have purported to act, or has held himself out, as a constituency member for any single constituency or for a group of constituencies other than the region from which he was elected.”’.

[Mr Donohoe]

New clauses 1 and 2 relate to regional Members of the Scottish Parliament, who were introduced in an irksome move and have been with us for a long time—since the outset of the Scottish Parliament.

[Mark Lazarowicz]

My hon. Friend describes the provisions for a system of proportional representation as irksome. How many representations have been received by Government or anybody else that call for a change to the voting system for the Scottish Parliament, apart from those of my hon. Friend and a few of our colleagues?

[Mr Donohoe]

Since I have been in a position to see this matter at first hand, I have received many representations over the years from constituents who have concerns about the system, as I am sure has my hon. Friend. As a result of my tabling the new clauses, a number of individuals have written to me to tell me that I was spot on in making this argument. Therefore, there have been a number of representations. Not many people have come to me and argued for the continuation of the crazy system that is in being. I will expand on that point later in my speech.

Never in the history of politics has a political party given so much power to its opponents as in the Scotland Act 1998. Since then, all sorts of people have come on to the scene, cherry-picked within the constituencies and caused mayhem. That is why I have tabled the new clauses. Obviously, we must look at this whole question. We must go back to the first election to the Scottish Parliament in 1999. In my constituency, there was the crazy situation in which not only was the person who came second under first past the post elected to the Scottish Parliament through the pool for constituency Members, but the people who came third and the fourth. As my constituents tell me, something is fundamentally wrong when such a system is allowed to continue. That is the crux of my argument this evening.

[Jim McGovern]

I go round the doors every weekend, as I am sure does my hon. Friend and most Members here. Does he agree that most people on the doorstep are confused about how they vote for the list person? In politics, the people who know about it regard it as the assisted places system.

[Mr Donohoe]

My hon. Friend is absolutely right. I will develop that argument in my speech.

[Pete Wishart]

I am interested to know the view of the Labour party on this issue. The names of the hon. Gentleman and five of his hon. Friends are listed as supporters of the amendment. What is the view of those on the Labour Front Bench on Westminster controlling what happens with Members of the Scottish Parliament? What is the view of Labour Members of the Scottish Parliament on that?

[Mr Donohoe]

I am sure the hon. Gentleman knows that there are varying views on the subject, as there are on many subjects. As far as my constituents are concerned, however, there is no doubt: to a person, they support the argument that I am making tonight that there should be a fundamental change to how we elect our MSPs. There was immense resistance to the fact that the person who came fourth under first past the post was eventually elected to the Scottish Parliament. That seems to me to be wrong.

[David Mundell]

Will the hon. Gentleman give way?

[Mr Donohoe]

Oh, go on then.

[David Mundell]

The hon. Gentleman has been very consistent on this issue, and I respect his views even though I do not necessarily agree with him. However, I am confused about the Labour party position. For many years, those of us who were list MSPs heard the arguments that he is making about how the list was an assisted places scheme for people who failed to be directly elected under first past the post. Now I find that Labour party first-past-the-post candidates are on the list, and some of them are even topping lists when there is a fear that they will lose in the first-past-the-post constituency. How does he feel about that?

[Mr Donohoe]

I had the greatest respect for Phil Gallie, the former MP for Ayr, who was also a list MSP. He hated every minute of his time in the Scottish Parliament, because he knew that as a list Member, he had absolutely no powers. I will develop that argument later in my speech, but even Tory MSPs were opposed to the concept of the list system.

[Mrs Laing]

I understand that the hon. Gentleman’s argument is that the simple first-past-the-post system used in elections to Westminster produces a fairer result than other systems. Is he concerned that the introduction of the alternative vote for Westminster would undermine elections to this place, and therefore the legitimacy of this House of Commons?

[Mr Donohoe]

I am not sure that I want to wander down that road, because the hon. Lady is well aware that I am the joint chairman of the all-party group for the promotion of first past the post, and also the secretary of the relevant group in the Labour ranks. Indeed, last week I asked the Prime Minister a question about the matter and he agreed with me, which is a first. Members all know where I stand and where the campaign on first past the post is going.

Let us examine the situation as it stands. If I go to a health board meeting in Ayrshire, how many MSPs can turn up? Some 24 can turn up and be part of the debate. That is not a problem in itself, but some of those list Members represent areas outside Ayrshire. There is therefore immense conflict when decisions are taken about where health services for them and their constituents should be. I have seen that at first hand on at least a dozen occasions. As a consequence, I no longer go to those meetings. Instead, I sensibly insist on the health board meeting the MPs and constituency MSPs alone, instead of the nonsense of the cherry-picking that was and is going on among list Members north of the border.

[Mark Lazarowicz]

My hon. Friend clearly has strong views. I must say that in the area that I represent, where there are Conservative, Liberal Democrat, Green, Labour and independent list MSPs, I do not have the problems that he seems to encounter. Is not the real difficulty with his proposal that it would lead to an end to the proportional system for the Scottish Parliament? Is that not what it is really about? Would it not be undemocratic and wrong if Labour, the SNP or any other party got a majority of seats with 30% of the vote?

[Mr Donohoe]

I am sure my hon. Friend has examined my two new clauses, which are self-supporting. It is correct that in the first instance I want to bring back coterminous boundaries for all MSPs, so that there is a semblance of an organisation that can be supported by all parties in this place and elsewhere. However, the second point that I want drive home is as important as the first. I do not believe that list Members should be allowed, under any circumstances, to pick up the funds that are currently available to them to represent—or not represent—what they perceive to be their constituents.

That brings me neatly to list MSPs themselves. On a substantial number of occasions, the list Member has cherry-picked, to the detriment of the possibility of inward investment by companies of some size into my constituency—I take exception to that more than anything. On the basis of what they perceived to be environmental issues, they have come in and destroyed any possibility of a company coming into my constituency. That is wrong, and there must be accountability, but the list Member is not accountable to constituents as I am to mine. That must be fundamentally wrong. No hon. Member can tell me whether the list Members have any accountability within the structures of their political parties. That is the problem. There is no accountability whatever for list Members—[Interruption.] Does the hon. Member for Na h-Eileanan an Iar (Mr MacNeil) want to intervene?

[Mr MacNeil]

indicated dissent.

[Mr Donohoe]

I did not think he would. That demonstrates exactly what I am saying. There is no accountability, and no structure to allow it, for list Members. That is a major problem, and why I have tabled new clauses 1 and 2.

[Jim McGovern]

Does my hon. Friend agree that most people would recognise their MP, some would recognise their MSP, and some may even recognise their MEP, but very few would know who their list MSP is?

[Mr Donohoe]

The only one I could think anybody would recognise would be the ex-Member for Cumnock, Carrick and Doon Valley, George Foulkes. Whether that is because of his politics or because he was the chairman of Hearts I do not know.

[Mr MacNeil]

I am grateful that the hon. Gentleman mentions list MSPs. In the highlands, we know that Rob Gibson and David Thompson are the SNP list MSPs, but I have no idea whatever who the Labour MSPs are.

[Mr Donohoe]

The hon. Gentleman makes my point. Nobody actually knows their list Members. I could not name the ones in my constituency because there are 24 of them.

[Pete Wishart]

Does the hon. Gentleman know how many people in Scotland recognise Iain Gray? What would he make of these proceedings?

[Mr Donohoe]

Perhaps the hon. Gentleman’s smile will be on the other side of his face come the end of May. There is absolutely no doubt that Iain Gray will become as well known as anyone in Scotland as a result of becoming First Minister after 3 May this year. That was a great intervention—I would be happy to take similar ones all night.

[Mr MacNeil]

I do not know who the highlands Labour list MSPs are, so could the hon. Gentleman inform us?

[Mr Donohoe]

I think one of them is David Stewart.

[Mr MacNeil]

Think?

[Mr Donohoe]

Am I right?

[Mr MacNeil]

indicated assent.

[Mr Donohoe]

The hon. Gentleman indicates that I got that one right.

The fact is that we must look seriously at the current situation. This argument is what might be described as a slow burner, but I would like to develop it by moving on to the first-past-the-post system. I realise that I am running out of time, but I have a lot of support on both sides of the Committee, even if some hon. Members are hiding behind their mantle.

The fact is that there is only one solution to the problem that we face north of the border—to bring about first past the post for every MSP. As a result, I suggest, for all sorts of reasons, that the best solution is that instead of the list Members system, by which there are 129 MSPs, we simply have two MSPs per Westminster constituency, with the exception of the Western Isles and Orkney and Shetland. I would make that concession. I am sure that the hon. Member for Na h-Eileanan an Iar would be very happy with that indeed. As a result, we would have 119 Members.

[Mr MacNeil]

Will the hon. Gentleman tell us—

Independent Financial Advisers (Regulation)

Brian H. Donohoe Excerpts

Monday 29th November 2010 Commons Chamber

[Mark Garnier (Wyre Forest) (Con)]

I beg to move,

That this House has considered the matter of regulation of independent financial advisers.

I am delighted that my hon. Friend the Member for West Worcestershire (Harriett Baldwin) and I have secured this debate. As all hon. Members will know, this country finds itself in a dire financial situation, which extends deep into the private lives of many of our citizens. This country has the lowest personal savings ratio in the G20 and the highest level of personal debt, with half of all the personal debt in the EU borne by the inhabitants of these islands. We face a well-known problem of pensions underfunding, involving not just a deficit on pension liabilities but the fact that people are not putting enough aside for their retirement. Mortgages were taken out at the height of the boom, in some cases at levels higher than 100% of the value of the property to which they relate, and mortgage lenders worry about the next time bomb that may hit our economy—a trend towards interest-only mortgages. These are mortgages where the borrower hopes that inflation and an opportunity to downscale will pay off their mortgage. We also have a housing market in which many commentators still consider there is more readjustment to come.

It is against that background that we are debating the regulation of an important group of professionals, namely independent financial advisers. I am particularly keen to talk about that group because if we are even to begin to deal with the problems that I have outlined, we need a resource of professionals who will be able to spread the word and give sound financial advice to the wider population. The marketplace for retail investment advice in the UK is very diverse, involving banks, building societies, stockbrokers and some 33,000 independent financial advisers, as well some other players. It is fair to say that there have been problems in the past, and the Financial Services Authority suggested in its evidence to the Treasury Committee last week that there was and still is a significant amount of mis-selling every year; a figure of some £250 million a year was volunteered, but that is based largely on assumption and extrapolation from previous mis-selling scandals.

[Mr Brian H. Donohoe (Central Ayrshire) (Lab)]

A number of constituents have come to me because they are very concerned about what the hon. Gentleman is talking about, as they are going to have to revalue themselves and go through another examination. Can he shed some light on why that should be?

[Mark Garnier]

I trust that the hon. Gentleman is referring to the independent financial advisers, who will have to do that. I will come to that a little later in my speech, if I may, but I will address it specifically.

The point I was making is important because it highlights the significant amount of money being drawn out of the net savings pool of the country. It is only right that the FSA and the regulators should address the problem. They looked into it and surmised that in this marketplace competition is hindered by opaqueness and incentive conflicts, resulting in the interests of firms versus those of customers not being fully aligned. The FSA set up the retail distribution review—RDR—in 2006 to address those problems, and the new rules are due to come into force in January 2013. Specifically, according to the FSA, the RDR aimed to bring about three principal changes. The first was an improvement in the clarity with which firms describe their services to consumers. Secondly, it sought to address the potential for advisers’ remuneration to distort consumer outcomes. Finally, it aimed for an improvement in advisers’ professional standards.

Equitable Life (Payments) Bill

Brian H. Donohoe Excerpts

Tuesday 14th September 2010 Commons Chamber

[Mr Hoban]

I shall give way to the hon. Member for Central Ayrshire (Mr Donohoe).

[Mr Brian H. Donohoe (Central Ayrshire) (Lab)]

I thank the Minister for, at last, giving way. I have been a Member for some time and longer than he has, so I can tell him that this was an issue before 1997. The Conservatives, at that time in government, refused to pay any compensation to the Equitable Life pensioners. Under the terms that they now suggest, they will cut about £5 billion of the compensation that the ombudsman recommended for payment, but I heard the Minister in Westminster Hall say on many occasions that they, in government, would pay the pensioners in full. Why have they changed?

[Mr Hoban]

The hon. Gentleman should really direct his anger at his own Front Benchers, who for years blocked the investigation of Equitable Life by the ombudsman, who tried to delay her report and who took six months to respond to her findings. The real culprits are on the Opposition Front Bench, not on the Government Benches.