amendment of the law

Debate between Brooks Newmark and Barry Gardiner

Monday 24th March 2014 Commons Chamber

[Mr Newmark]

Unless the hon. Gentleman is suffering from selective amnesia, he will know that it was the Labour Government who separated responsibility for QE from the Treasury and the Government and gave it to the Bank of England.

[Barry Gardiner]

I am not suffering from amnesia, selective or otherwise. I do recall that the process started in 2009 under the Labour Government, so I accept the hon. Gentleman’s point. Equally, we have to accept that the Bank of England’s own figures show the impact that that has had on savers over the lifetime of this Government. Elderly savers have had to bear the brunt of that. The Chancellor is trying to win them back with changes to the rules on individual savings accounts, and, for those approaching a decision on their pension pot, the prospect that they need not purchase an annuity. It is, however, QE that has in large part kept savings rates so low.

Government Ministers need to reflect on the changes to ISAs. They are a boost to mid-caps and the alternative investment market. Alternative investments are riskier. In the 2013 Budget, the Chancellor abolished stamp duty on AIM shares. By uniting share and cash ISAs, the Chancellor has boosted what is inevitably a riskier element of the City and is encouraging people to undertake less secure investments with their savings. It is important that that sort of incentivisation should be considered most carefully by Treasury Front Benchers. My hon. Friend the Member for Washington and Sunderland West (Mrs Hodgson) spoke of it being beyond the capacity of ordinary people, who include most of Labour Members’ constituents, to accumulate £15,000 in one year to put into an ISA. That suggests that the Government, in framing the Budget, have again been out of touch with the reality for many people.

I am deeply concerned that unfettered access to pension pots undermines the whole basis for tax relief on pension contributions in the first place. We give people tax relief on pension contributions precisely because we want to ensure that they do not become more of a burden on the state in old age. We may well be seeing the birth of the next great financial mis-selling crisis. Independent financial advice is all well and good, but in the past many advisers have shown themselves to be better at ensuring that their clients’ money serves their own purposes and interests rather than the interests of the clients whom they are supposed to be advising.

I am even more worried that the ability to access one’s pension pot should not become a way for the Government to tip people over the threshold of £23,500, where they will have to start contributing to their care costs. At today’s rates, a £25,000 pension pot would generate an income from an annuity of approximately only £1,500 a year. On top of the state pension, and even a modest works pension, an elderly person in need of care would not normally be pushed over the contribution threshold in such circumstances. Previously, the pension pot could be used only to purchase an annuity. Now that it can be converted into cash, I fear that a local authority could insist, under the rules, that it is converted into cash, thereby forcing someone to contribute to their care costs. I ask the Minister to give us a clear reassurance about that. Greater freedom for savers should not be a back-door way of enabling Governments to get their hands on people’s pension pots.

Nearly one in five of our young people is now without a job. The pity—and, I hope, the shame—of this Government is that they preferred giving tax cuts of £42,500 to the very richest in our society to giving a job guarantee to the young and long-term unemployed. Do the coalition partners truly believe that the families of this country would rather see bankers keep their exorbitant bonuses than see their children assured of quality training and serious jobs?

[Mr Newmark]

I am listening carefully to what the hon. Gentleman is saying. He should at least give the Government credit for abolishing national insurance contributions for employers who hire people aged under 21, to give young people a chance on the jobs ladder. That has brought youth unemployment down.

[Barry Gardiner]

The hon. Gentleman has made a reasonable point. It would be a very strange Budget if all its measures were objectionable to the Opposition. My purpose is to flag up the areas of disagreement, and the areas that I believe will pose serious problems to the economy in the future.

The reality for my working constituents is that they are earning less, and earning less in jobs that are less secure. As their real wages have fallen, they have had to rely all the more on housing benefit. That is why the welfare bill under this Government is rising rather than falling. More people are having to claim housing benefit because their wages have simply failed to keep pace with inflation. No wonder the Government are spending £13 billion more on welfare than the Labour Government did in 2010, and no wonder they are spending £30 billion more than the Chancellor himself predicted in 2010. Is it not incredible that a coalition Government who came to power saying that borrowing was the problem have borrowed more in three years than the Labour Government did in the 13 years during which they were in office?

People do not forget that it was this Government and this Chancellor who said that they would balance the books by 2015. Now, in the Budget, the Chancellor has had to admit that in 2015 there will be a £75 billion deficit, and that, in addition, he will be borrowing £190 billion more than the amount promised in 2010.

The Government need to answer the single question that should be asked about all Budgets. Cui bono? Who benefits? We are asking about more than mere distribution. We are asking about fairness, about equality and about justice. On that question, the Government have failed.