Static Caravans (VAT)
Cathy Jamieson Excerpts(12 years, 5 months ago)
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Mr Stuart
My hon. Friend is right. All Government Members are committed to the aims and objectives set out in the Budget. We wanted a Budget for growth. We support lifting people out of tax; we support lowering corporation tax; we want investment; we want British industry to be supported. May of us are therefore gently but firmly—and, I hope, powerfully—saying to the Government this evening that this measure should be looked at again, and, as I have said, they have agreed to do so.
Terence Higgins, then Financial Secretary to the Treasury, said in March 1973:
“We have already distinguished between two kinds of caravan; the kind of caravan which is a home or a residence, and not normally the kind that one tows around—because even outside the West Country it would be too large to tow conveniently—and that which is not regarded as a home. Because of the general provision in legislation for relief from VAT for housing it was thought appropriate to include large caravans within the scope of relief.”—[Official Report, 20 March 1973; Vol. 853, c. 393.]
Therefore, any suggestion that that was not considered by this House is false. I hope that will be reflected on.
In June 1989, when my right hon. Friend the Member for Hitchin and Harpenden (Mr Lilley) was Economic Secretary to the Treasury, he said that there was no question of withdrawing zero rating from the purchase of static caravans. He was right then, and we should stick with that view now.
I want to give the Minister 10 minutes in which to reply, if no other colleagues wish to intervene on me. [Interruption.] Give him eight minutes? Okay, fair enough. Finally therefore, let me pass on to the Minister some comments from a constituent of mine.
Aaron Cambridge and I live in the same town, Beverley in east Yorkshire. He works at Willerby Holiday Homes, which in the most recent industry returns at the end of last year was listed as having more than 800 employees. It is based in the constituency of the hon. Member for Kingston upon Hull East (Karl Turner), whom I am delighted to see in his place. Even without this proposed VAT increase, Aaron has been on a reduced work schedule of three-and-a-half days a week for the past six months. He told me that he has worked in the caravan industry for 24 years and can never remember such hard times for the industry. That is the situation the industry is in now, before this possible VAT increase. There are 800 staff just at Willerby, which is a manufacturer, and we know that there tend to be many more associated jobs in supplier firms and others around a manufacturing centre.
Mr Deputy Speaker (Mr Nigel Evans)
Order. The hon. Lady rises to speak from the Opposition Dispatch Box. As that cannot be done in an Adjournment debate, may I ask her to make her intervention from the Bench behind?
Cathy Jamieson
I apologise, Mr Deputy Speaker. I still find the conventions of the House somewhat confusing.
Cathy Jamieson
Does the hon. Gentleman agree that the Treasury should look again at the impact assessment? It estimates that it will take in some £35 million in 2013-14 as a result of this measure, but it should look again at the impact assessment to compare that with the amount of money that will be lost in the wider economy.
Mr Stuart
The hon. Lady is right. I have many more examples, including that of Laura Goldspink, who lives in my constituency and also works at Willerby Holiday Homes. Charles Gillett, who runs a business that is 100% reliant on the caravan industry, has talked of
“an industry on a knife edge, struggling to emerge from the ravages of the recent recession.”
He, too, pointed out that it is not 750 companies affected, but well over 2,000. Peter Smith, the chairman of the Swift Group—one of the leading employers in east Yorkshire, with 800 staff and a turnover of £200 million —has said:
“A very conservative HMRC prediction is a reduction in demand of 30% which would lead to the lowest market figure for over a decade of around 11,000 units,”
as we have discussed. He continued:
“Such a reduction is likely to increase the cost of materials (due to economies of scale), make credit harder to come by and jeopardise the viability of manufacturers and suppliers.”
I have said enough. Peter Smith put his finger on it, as have all the other Members who have spoken. The Budget is all about creating jobs, but if this measure is implemented, it would have exactly the opposite effect. What we ask, from both sides of the House, but particularly the Government Benches, is for the Minister to listen to the contributions to the consultation and reconsider.
Finance (No. 4) Bill
Cathy Jamieson Excerpts(12 years, 5 months ago)
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Mr Chope
I rise to speak to amendment 9 and the other amendments in the group, standing in my name and that of my hon. Friend the Member for Gainsborough (Mr Leigh). We face a rather unsatisfactory state of affairs, because the guillotine will fall at 6 o’clock, which means that we have precisely 52 minutes to discuss the whole of clause 8 and schedule 1, which deal with child benefit and will affect 1.2 million families up and down the country, potentially yielding £1.5 billion for the Exchequer. How can one do justice to the complexity of what the Government are proposing in this short space of time?
Mr Chope
If I am given the opportunity, and if I do not succeed in persuading the Government of the merits of amendment 28 in particular, I shall feel obliged to vote against both the clause and the schedule. I think that by then we shall have done everything possible to try to persuade the Government to change their mind., and if they do not want to change their mind, I shall feel duty bound to express my view in the Lobby accordingly.
The Treasury figures show that there are 840,000 households with children in which at least one person earns over £60,000 a year. I have proposed that everyone earning over £60,000 a year should pay a standard tax increment of about £1,000, which would generate about £2 billion. The 840,000 people in households with children would be only £300 better off, or a bit more, depending on how many children they had. There are approximately another 1.1 million people with taxable incomes of over £60,000 who do not have children. If everyone earning over £60,000 paid an extra £1,000, we would not have to bother with this very partial project of penalising families with children.
I am not suggesting that as a definite solution. I should much prefer, for example, to reduce our contribution to the European Union. [Hon. Members: “Hear, hear.”] However, it would at least be fairer and more consistent with the Government’s avowed intent that those on higher incomes should contribute more to deficit reduction.
Amendment 9 proposes that the
“High-income child benefit charge”
in clause 8 should be described as a higher-income charge. I do not think it accurate to describe someone earning over £50,000 a year as having a high income—although such people may have a higher relative income, as is apparent from the CARE figures that I gave earlier. Funnily enough, HMRC’s own Budget document refers to
“Child Benefit: Income Tax Charge for Those on Higher Incomes”.
I hope that my hon. Friend the Minister will accept that the charge in clause 8 should also be described as a “higher” rather than a “high” income charge. Under the heading “Policy objective”, the document states:
“In order to address the fiscal deficit the Government believes that it is right to ask those on higher incomes to contribute more.”
Obviously mine is a small amendment in comparison with the more substantial ones. If the Government are unwilling even to concede that point, it shows that the degree of stubbornness in the Treasury is even greater than many of us thought.
Is the high-income child benefit charge classified as a tax? I tabled a question to that effect that was due to be answered on Monday, and have just received a written answer from my hon. Friend the Minister—it should have been given then, but I understand the reason for the delay—which states:
“Classification is a matter for the independent Office for National Statistics.”
Effectively, we are talking about a new tax on people with particular incomes, rather than about removing child benefit from them. I have every belief that, in due course, the Office for National Statistics will classify this as a tax.
The Government have been keen to emphasise the need to cut expenditure, and not so keen to introduce tax increases. That may be why they have been rather coy about admitting that this will probably be a tax increase for definition purposes rather than a cut in benefit. My amendment 28, on which I hope we shall have an opportunity to vote, would ensure that there was no unfairness in the treatment of families with identical incomes. The single-parent trap and the couple penalty would be avoided, and the objective that taxes must be fair and simple would be met. This tax is neither fair nor simple.
We were discussing the granny tax earlier, and I would describe the measure now under discussion as a tax targeted at mummies and daddies in the squeezed, hard-working middle. People on equivalent incomes without parental responsibilities have nothing extra to pay and some households on joint incomes with children will also pay nothing, whereas single parents earning over £60,000 will pay a minimum of £1,300 a year more than before, and some of them will pay a lot more than that. This cannot be right. I hope the Minister will say the Government have had second thoughts and are minded to withdraw their proposal.
Cathy Jamieson
I will be as brief as possible, as I am aware that there is not much time left.
There are two key issues: the principle of what child benefit is supposed to be for, and the practical implications of the Government’s proposals. I want to emphasise the word “child” because we have lost sight of the fact that we are talking about children. The Child Benefit Bill introduced in May 1975 by the then Labour Government, with all-party support, was intended to offer a universal, non-means-tested, cash-free tax benefit for the good of all children. At its simplest, it was designed to ensure that mothers had money paid regularly into their purses, giving them at least some form of stable income, and that the money would be used for their families.
Steve McCabe
Like the hon. Member for Christchurch (Mr Chope), a constituent of mine, Mrs Morris, contacted me. Her family’s income falls just above the threshold. They have four children to feed and clothe, and a mortgage, bills and fuel costs to pay, and they are going to lose £3,000 as a result of this measure. How can any reasonable person say that is fair?
Cathy Jamieson
My hon. Friend makes a very interesting point, and I shall come on to address the effect of this measure on many families on that borderline.
Many Members will have come from, or know, families for whom child benefit—or the family allowance, as it was called in days gone by—was a lifeline. No doubt some on the Government Benches will characterise our position as Labour trying to give more cash to high earners.
Cathy Jamieson
But that argument simply does not wash from a Government and a Minister who have continued to support a tax cut to millionaires while millions of ordinary people, including Mrs Morris and many people in my constituency, are feeling the pinch. Article 27 of the UN convention on the rights of the child, which the UK has signed, outlines an obligation to assist parents in meeting the material needs of their children.
Mark Reckless (Rochester and Strood) (Con)
Yesterday, the Prime Minister pointed at the Opposition Benches and said Labour MPs would be voting to give themselves a benefit, yet just after the Budget the Leader of the Opposition said to the Cabinet that they were getting rid of the 50p top rate of income tax to help themselves. Can we not all accept that we on the Government Benches are getting rid of the 50p rate to try to improve the economy, and Labour Members are trying to protect universal benefits and the welfare state as they have understood it?
Cathy Jamieson
I was hoping that the hon. Gentleman was going to respond to my point about children, but that is obviously not the case.
It is expected that the revised proposal will affect about 1.2 million families. Some 790,000 couples and 30,000 lone parents will lose the full amount of their child benefit. A further 330,000 couples and 20,000 lone parents will lose a proportion of their child benefit. The average loss will be about £1,300.
When these proposals were first announced, I tabled a parliamentary question asking for an estimate—not an exact figure—of the number of people earning between £50,000 and £60,000 who are in receipt of child benefit in each parliamentary constituency. I received the answer two days ago. It was short and simple: this information is “not available.” Surely that is exactly the sort of information that should be available in advance of such proposals being made to help MPs judge the impact of Government policies on their constituencies.
Kate Green
Does my hon. Friend agree that if the Government do not even know that simple fact, they are even less likely to know how many people have incomes that vary and fluctuate between £50,000 and £60,000, and that that is going to introduce yet further complexity for those families in the course of the year?
Cathy Jamieson
Again, my hon. Friend makes an extremely important point, which I hope to discuss in relation to how the clawback will operate. Will the Minister commit to provide that breakdown by parliamentary constituency and make it available, as a matter of urgency, in the House of Commons Library?
It has appeared at various times during the debate that the announcement of the changes was designed more to appeal to the Tory party conference than as a plan to be actually implemented. Suggestions have been made that the Chancellor perhaps did not even believe that he would have to implement it. I do not know whether that is true, but this appears to be yet another part of what the Leader of the Opposition described as an “omnishambles”. In Scotland, we would say that the Government’s plan is a bit of a boorach, which translates as a mess or a muddle.
This boorach is, once again, entirely of the Government’s own making. On the clawback, those with incomes above £50,000 will have their child benefit withdrawn at 1% for each £100 of income from January 2013. There is to be no child benefit entitlement for families where any earner has an income of more than £60,000. Some of the changes being proposed might be small steps forward, but they do not change the fundamental unfairness. To return to the point made by my hon. Friend the Member for Birmingham, Selly Oak (Steve McCabe) about his constituent Mrs Morris, a couple with children where one earner is on £60,000 and another is on £10,000 will lose all their benefit, whereas a dual-earner couple on £50,000 each will potentially keep it all.
As the hon. Member for Christchurch (Mr Chope) said, the implementation of this approach will be complex. New computer systems and new staffing will be required. The Government have estimated costs of between £8 million and £13 million for the computer systems’ development and running costs alone, plus £100 million for staff resources. Interestingly, they have estimated that £5 million will be spent on customer information. I do not know exactly what customer information they intend to provide, but I hope that it will be explained in plain English. Over the years I have grown to mistrust Bills that have one-line clauses and multi-page schedules.
Schedule 1 is certainly not set out in customer-friendly wording. An MP sitting in an advice surgery trying to look through it to check out whether or not their constituents have an entitlement would have to go through seven pages. After several lines defining person “P”, person “Q” and whether or not “Q” is the partner of “P” throughout the week, they would find new section 681C, which provides an equation to work out whether someone would be entitled or not. That is not very customer friendly. There is a serious point as to whether the clawback mechanism is fair and workable.
Mr Mark Spencer (Sherwood) (Con)
Will the hon. Lady explain to the taxpayers of Sherwood in Nottinghamshire who are working more than 50 hours a week and probably earning only £20,000 as a family, why they should pay tax to support someone earning in excess of £60,000?
Cathy Jamieson
That is an important point and I will address it straight away. We have to decide whether or not we believe that child benefit is a benefit that should be paid for the good of children. What we are seeing in this measure is an unfair system, which is not providing for children; it is introducing a new form of taxation, as has rightly been pointed out, and people will be facing huge problems.
I was going to deal with my next point later, but I shall say now that individuals with an income in excess of £50,000 are going to be required to inform Her Majesty’s Revenue and Customs as to whether they or their partner are in receipt of child benefit. It is not clear what would happen where someone either does not know or claims not to know whether their partner is receiving child benefit. In the absence of a legal obligation on partners to share information on benefit receipt, it is unclear what the tax authorities are going to do. Perhaps the Minister will enlighten us.
Helen Goodman (Bishop Auckland) (Lab)
My hon. Friend is making an extremely important and interesting point. Is she saying that this measure threatens the independent taxation of women?
Cathy Jamieson
My hon. Friend makes a very good point. As I have outlined, the problems could be similar if both partners had an income in excess of £50,000. The charge would then apply to the partner with the higher income, and to avoid it being applied twice the partners would presumably have to share information with each other on their incomes and co-ordinate responses in their respective self-assessment forms or HMRC would have to implement some mechanism to link together individuals’ tax records to decide which partner was liable for the charge.
As was mentioned earlier, there would potentially be further difficulties if somebody who did not expect to come within the income bracket for the child benefit charge discovered at the end of the tax year that their income exceeded the limit. It can be quite common for self-employed people to find on preparing their accounts that their income was greater than expected. HMRC would then apply the charge retrospectively, but in order to do so it would need full details of the person’s cohabitation history for the year end. I gently tell the Minister that the potential for disputes is fairly obvious. The living together as husband and wife test is an established feature of the social security system, but we all know from the people who come to our constituency surgeries the problems that emerge. Its extension to the tax system raises a huge range of other issues. Whether a partnership exists will have to be determined on an ongoing basis throughout the year, rather than just at a single point of time, and individuals might not be aware of the need to report changes in their personal circumstances to the tax authorities.
We have already heard that there is a danger that the plan will encourage people to deny the status of their relationship to avoid the child benefit change, which will effectively introduce a couple penalty. That could be a disincentive for a lone parent considering moving in with a higher income person and could create an incentive for couples to split up when one partner has a high income. For people with several children, partnering decisions could have significant financial implications.
Fiona O'Donnell
Has my hon. Friend, unlike the Government, considered the fact that in families where one parent chooses to stay at home and raise their family, that parent will now be forced into seeking employment? In this market, that will not be feasible.
Cathy Jamieson
My hon. Friend makes a significant point and that is part of the fairness test, which I do not think has been met. The Centre for Social Justice has been very critical of this aspect of the Government’s plans, which it argues could
“threaten a new wave of family instability and breakdown…which flies in the face of their commitment to ‘shared parenting’.”
Mark Garnier
I am not entirely unsympathetic to a great many of the hon. Lady’s points, but what she is describing has a great deal to do with the complexity of the tax system as a whole. That tax system doubled in complexity under her Government.
Cathy Jamieson
With respect to the hon. Gentleman—he said he had some sympathy with my points, so I do not want to be entirely negative in response—we will not solve the complexities of the taxation system by adding even more complexities that are unfair to families and will affect children negatively.
Let me put one final issue on the record. People who are not in work and who receive child benefit for a child under 12 receive national insurance credits to enable them to build up entitlement to state pensions. The Government’s original announcement led to concerns about the impact on future pension entitlements of women, in particular, if families stopped claiming child benefit. The Government said from the outset that no one would miss out on national insurance credits as a result of the child benefit changes, but it is unclear how they proposed to ensure that. Under the latest proposals, people who are entitled to child benefit and families affected by this charge may elect not to receive it, but a claim for child benefit will still need to be made in order to receive national insurance credits. Information published by HMRC confirms that.
I am extremely conscious of the time so I will not say anything more, other than that I think that everybody should listen carefully to the debate and to the points that have been made. When Members consider how to vote, they should consider both the principles involved of support for families with children as well as the layers of complexity and confusion there will be if the proposal goes through.
Mr Stewart Jackson
I had not intended to speak in this debate so I shall keep my remarks brief. I do not have at my fingertips the comprehensive figures that my hon. Friend the Member for Christchurch (Mr Chope) gave; he made some cogent and powerful points. From my point of view it is always a very risky endeavour when a political idea is fleshed out to become a fiscal policy of any Government. The remarks made just after the general election at the Conservative party conference were really an aspiration that is now being turned into a policy. I believe that this policy is a fiscal time bomb that will blow up in the faces of this Government. I also believe that what we are doing—[Interruption.]
Finance (No. 4) Bill
Cathy Jamieson Excerpts(12 years, 5 months ago)
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Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op)
I beg to move, That the clause be read a Second time.
The Temporary Chair (Sir Roger Gale)
With this it will be convenient to discuss the following: new clause 2—Review of VAT Exemption for small vehicles—
‘The Treasury shall, within two months of Royal Assent to this Act, lay before Parliament a report on the effect on the availability of transport services on the VAT exemptions for small vehicles.’.
New clause 3—VAT impact of changes—
‘No new Order shall be made under section 30(4) or 31(2) of the Value Added Tax Act 1994 unless the Chancellor of the Exchequer has fully reviewed the impact of those changes on jobs, living standards and businesses and placed the review in the Library of the House of Commons.’.
New clause 4—Definition of ‘hot food’—
‘No new Order shall be made under section 30(4) of the Value Added Tax Act 1994 which amends the current definition of “hot food” in the Act.’.
New clause 5—Value Added Tax: baked products—
‘No new Order shall be made under section 30(4) or 31(2) of the Value Added Tax Act 1994 which shall affect baked products when no attempt is made to keep the product hot for consumption.’.
New clause 6—VAT on caravans—
‘No new Order shall be made under section 30(4) or 31(2) of the Value Added Tax Act 1994 which amends the Act to apply to holiday caravans that are currently zero rated.’.
New clause 7—VAT: protected buildings—
‘No new Order shall be made under section 30(4) of the Value Added Tax Act 1994 which amends the current definition of “protected building” in the Act.’.
New clause 8 has not been selected because it is outside the scope of the Bill. I indicate to the Committee that it will be for my successor in the Chair, the Second Deputy Chairman of Ways and Means, to determine, once she has heard more of the debate, whether to call any of the new clauses other than new clause 1.
Cathy Jamieson
It is a pleasure to follow some excellent speeches. As we heard earlier, the harsh reality of the Budget is that it has done nothing to give Britain the jobs and growth we desperately need. We have heard how it has failed—[Interruption.]
The Temporary Chair
Order. I am sorry to interrupt the hon. Lady. Will Members leaving the Chamber please do so quietly? I wish to hear the debate.
Cathy Jamieson
Thank you, Sir Roger. That gives me the opportunity to repeat, for those unable to hear because of the conversations, my point about the harsh reality of the Budget, which has done nothing to give Britain the jobs and growth we desperately need, and about how it fails the fairness test. It has done nothing to help support families and pensioners on modest and middle incomes. We will discuss that further tomorrow so I shall not dwell on it now. It would, of course, be outwith the scope of the new clauses. I shall only say that families are already finding out just what the Government’s decisions will mean for their household budgets. As we will hear, businesses are also now finding out that the botched Budget makes no economic sense for them either.
There was a time when people might have given the Chancellor some credit for his strategic brain. Some on middle incomes and small businesses might even have given him the benefit of the doubt on economic policy, notwithstanding our many warnings about cuts that go too far and too fast. They might have given him the benefit of the doubt even if they did not completely agree with everything he was doing. But how times change. The Chancellor has had several weeks of torrid headlines—The Mirror: “Half-baked Tory tax a mistake-and-bake from Osborne and co”; The Sun: “PM David Cameron is urged to show leadership over pasty-gate”; The Guardian: “‘Pasty tax’ is the last thing people need”; the Evening Standard: “Heston says pasty tax will stop artisan bakers earning a crust”; and even “Tax on beloved Cornish pasties sparks furore in Britain” in USA Today and “‘Pasty tax’ row heats up for British PM” on the al-Jazeera website.
Mr Redwood
Is the hon. Lady at all worried that the fine reputation of the pasty will be damaged by so many MPs trying to associate themselves with it and get their ratings up as a consequence?
Cathy Jamieson
I am sure that the pasty industry is looking on as we speak and will want to know exactly which MPs have gone and sampled the local delicacies in whichever part of the UK they happen to live.
Those weeks of torrid headlines have led us to the current situation. There is now a pasty petition, and there has apparently been a pasty summit, while Greggs is planning a pasty protest march on Downing street to plead with the Prime Minister to step in personally and kill off the hated pasty tax.
Brandon Lewis
The shadow Chancellor is quite right. Does the hon. Lady not agree that in removing this VAT anomaly, it is only fair to protect the interests of the fish and chip mongers in places such as Great Yarmouth?
Cathy Jamieson
The interests of fish and chip shops have been raised on a number of occasions in this debate, and I am sure that plenty of people will want to patronise those local establishments. However, that does not get us away from the fact that the introduction of this measure has been an absolute shambles.
Matthew Hancock
I am grateful to the hon. Lady and to the shadow Chancellor for encouraging her to give way. I have a simple question: is Labour going to reintroduce this anomaly, should it ever win an election?
Cathy Jamieson
I am almost disappointed that I took that intervention, if that is the best that the hon. Gentleman can come up with.
We on the Opposition Benches like to be helpful, so we are going to give the Government the opportunity to step back from the current mess, which is entirely of their own making, and drop these ill-thought-out plans, which have led to more questions being asked about hot and cold snacks than anyone could have dreamed were possible.
Before I move on, and before anyone asks me when I last ate a pasty—or a bridie, as it would be in Scotland—I have a confession to make. I am one of Parliament’s three vegan MPs, so the delights—[Interruption.] I hear calls of “Resign!” The delights of the Greggs steak bake have passed me by, although it is a firm favourite with my son, and the cheese and onion bridie is a staple component of my husband’s diet. However, I am very grateful to Brownings the bakers, in Kilmarnock in my constituency, which, in advance of Kilmarnock football club’s recent cup final triumph, created a vegan Killie pie, to mimic the award-winning Killie pie, so that I would not go hungry—some Ayrshire colleagues on the Government Benches can see where this is going—while other Kilmarnock supporters were enjoying that award-winning local delicacy.
When I went along to the bakery to receive the pies, it never occurred to me that such delicacies would become the hot—or cold—political topic only weeks later. We have seen quotation after quotation from bakeries and other producers of hot snacks, warning the Government of the problems that the tax will create for them. Indeed, who would have thought that the Treasury Committee would be taking evidence from the Chancellor on what constitutes an ambient temperature? Efforts on Second Reading to clarify exactly what “the ambient temperature” means did not elicit much more information, although we did learn that the hon. Member for North East Somerset (Jacob Rees-Mogg), who I see is in his place, prefers sausage rolls to pasties. I am sure that that was very useful information, and it was interesting to find it out, but it threw very little light on the rest of the subject.
Notwithstanding the Chancellor’s attempt to explain his rationale on hot takeaways to the Treasury Committee—which makes for fascinating reading—we are still struggling to find out whether the hot roast chicken selected in the supermarket by my right hon. Friend the Member for Stirling (Mrs McGuire), to which she referred on Second Reading, would be liable for VAT if it had cooled down by the time she reached the checkout.
Mrs Anne Main (St Albans) (Con)
In successful pasty shops such as Pengenna’s in Bude, the pasties come out of the oven and people eat them hot straight away. They are not being kept hot; they are being delivered hot and fresh from the oven. Does the hon. Lady share my concern that that represents an anomaly?
Cathy Jamieson
The hon. Lady makes a good point, and it will be interesting to see how she votes at the end of the debate.
If I were to go back to Brownings, my local baker, and purchase two vegan Killie pies, one to eat there and then and one to take home for another day, would one or both be VATable, to use the term the Chancellor used before the Select Committee?
Cathy Jamieson
I will give way—I was going to say “to my hon. Friend”, but he is actually my former colleague from another place.
Mr Wallace
The hon. Lady will know that Kilmarnock has some of the best fish and chip shops in Scotland. If she were not a vegan, she would certainly know that. Is she really saying that her party wants to maintain the competitive disadvantage that her local fish and chip shops have? Is she really supporting the big supermarkets and chains that will put those small chip shops out of business by ensuring that that loophole is exploited?
Cathy Jamieson
I am sure that the hon. Gentleman patronises many of those chip shops on his regular visits to my part of the world—and sometimes to my constituency. I hope that he will go to Brownings the bakers and have a Killie pie, if he has not already had one. The point that he makes does not negate the fact that it is primarily the smaller bakers—the so-called artisan bakeries and those that produce traditional products—that are going to have a problem as a result of this tax.
I want to return to my point about whether one or both of my two vegan Killie pies would be VATable. I am unsure whether “to VAT” is actually a verb that would provide us with the word “VATable”. I am, however, aware that the word “ambient” has its roots in the Latin word for “going round”. The Chancellor’s reputation, if not his ambitions for the future, seems to be going round in ever-decreasing circles as a result of this furore.
The Treasury Committee employed its usual straightforward way with words when it stated:
“We recommend that, where changes to complex areas of taxation are proposed, the greatest possible supporting material be published to allow for greater scrutiny of the possibility of unintended consequences.”
Those are extremely wise words—[Interruption.] I am happy to take an intervention from those Government Members who are mocking the wise words of the Treasury Committee.
Sir Alan Beith (Berwick-upon-Tweed) (LD)
Am I to understand from what the hon. Lady is saying that the Labour party is making a costed commitment to remove the tax from pasties, and to ensure that there is no anomaly by also removing it from fish and chips and from every other foodstuff as well?
Cathy Jamieson
I have to confess that, the last time I looked at the Labour party manifesto, it did not mention fish and chips, or pasties, or bridies. We are absolutely clear that this tax will do nothing to support those local industries and that it will place yet another burden on hard-pressed customers.
Julie Hilling (Bolton West) (Lab)
Does my hon. Friend agree with John Carr, the managing director of Carr’s pasties in Bolton, that when VAT was introduced on food in 1980, it was a total mess? It meant, for example, that biscuits were deemed a luxury although cream cakes were not. Will not this change in VAT create an even bigger mess? Is it not a ridiculous measure to have introduced?
Cathy Jamieson
I thank my hon. Friend for that intervention. I want to give plenty of opportunity for Back Benchers to contribute to the debate. It is not just a debate about pasties; it is also about caravans. I know that many Members will wish to speak on that issue because of its importance for their local industries. [Interruption.] I would be happy to take an intervention from Ministers or from one of those senior Tory MPs quoted as having met the Chancellor today to lobby on the issue of caravans. Does anyone want to give us an update on that? No, I see no takers at the moment. Perhaps we will hear about it later. [Interruption.]
The Temporary Chair (Sir Roger Gale)
Order. I am sorry to interrupt the hon. Lady again. The hon. Lady must be heard, and she really should not have to shout from the Dispatch Box to put her message across. Many Members on both sides of the Committee want to participate in the debate. Whether or not they are called will depend to some extent on their behaviour in the Chamber, and it will also depend on the amount of time available to us.
Cathy Jamieson
Thank you, Sir Roger. I will do my best to bring my remarks to a speedy conclusion so that others can contribute.
Let me briefly mention other issues. I have already mentioned caravans, but building work on churches is also important, and I know that some colleagues will speak about it later. One other area, if I can be pardoned a very bad pun, not yet highlighted in the headlines is the whole issue of hairdressers’ chairs. I mention it simply because the Government’s proposal shows once again a lack of understanding of the operation of many small businesses.
People and women—and it is often young women—starting out on their hairdressing careers, perhaps on their first business opportunity, often rent a chair in a larger salon. I see some nods of agreement from Government Members. It is welcome if some of them understand the issue, but it does nothing at all to help those people setting out on their first business venture if they suddenly find that they are going to have to pay more costs. The National Hairdressers Federation has highlighted further anomalies. Conservative Members might not be aware of it, but it is common practice in hairdressers’ businesses to rent out space not only to other hairdressers, but to others in the beauty and therapy professions. The anomalies highlighted by the NHF are made worse by the Government’s proposals.
David Morris (Morecambe and Lunesdale) (Con)
I can tell the hon. Lady of a loophole that has needed closing for many years. Although it is possible to rent a chair in the hairdressing industry, the problem has been that VAT is levied on the premises. I think it is right to place it on the individual because these people operate individually.
Cathy Jamieson
I am slightly surprised to hear that from the hon. Gentleman. All I wanted to do in raising this particular issue was to make the Government recognise that the consultation, which has been brought forward, amounted to too little, too late, and that it would have been far better if it had been done earlier.
Back Benchers want to contribute, so I shall close in order to give them the opportunity to speak. It would be useful, however, if some Conservative Members were able to give us an update on the meeting apparently taking place today. Will there be a change of position? Will the Government withdraw, particularly from the caravan tax, but also from the other ill-thought-out taxes? Once again, I see no one seeking to intervene on this particular point, so I shall finish and allow others to raise further issues.
Peter Aldous (Waveney) (Con)
I am grateful to be called to speak. I shall restrict my comments to new clause 6 and the proposed application of VAT to the sale of static holiday caravans from 1 October. My interest is a constituency one, as I fear that the impact of the measure will be far greater than HMRC has estimated.
I have received representations and expressions of interest from a variety of parties. These include Hoseasons, one of the largest holiday providers in the UK, which is based in Lowestoft in my constituency; and five park operators, including the chairman of my own constituency Conservative association, who has herself written to the Treasury and a number of other Members. Small and medium-sized enterprises, including painters and decorators, and a bank are also concerned about the impact of the proposal on business viability.
Let me make three observations. First, I fear that HMRC’s assessment of the impact of the change takes full account of neither the whole supply chain serving the industry, nor the fact that the industry is concentrated in specific geographical areas that will be hit very hard. Some of those areas are pockets of deprivation and unemployment, and many are coastal communities such as my constituency, where tourism is a vital component of the local economy.
The supply chain includes manufacturers who are located almost exclusively in the UK—mainly in the Humberside area—wholesalers, and park operators. In recent years, the sale of static caravans has become a vital part of park operators’ businesses. Without such sales the future of some businesses will be at best uncertain, while others will cut both staff and the reinvestment in facilities that is so important if they are to continue to attract customers and ensure their own financial viability. Trading conditions have been very difficult for those operators in recent years, and the introduction of the new tax on 1 October, following so soon after the imposition of VAT on pitch fees, rates, and water and sewerage bills on 1 January, would contribute to a double whammy.
I am especially concerned about the fact that HMRC’s assessment takes no account of the numerous SMEs that work in the parks. There are builders, decorators, plumbers, electricians, people who fit carpets and curtains, and people who service plant and equipment. We should also bear in mind that many of those who work in the parks—admittedly on a seasonal basis—are young people gaining their first experience of work. An unintended consequence of the measure could, in some cases, be the removal of that vital first rung on the employment ladder.
Mr Gauke
My hon. Friend continues to make his case very strongly. We are, of course, listening to the arguments, but we think it right to have a VAT system that deals with some of the anomalies, and that is why we have finally addressed some of the problems that have remained in our VAT system for too long.
Cathy Jamieson
At the outset of this debate there was a bit of laughing and joking, but the tone quickly changed as people realised the seriousness of the issues under discussion. The Minister’s contribution reminded me of the well-known phrase, “When you’re in a hole, you’d better stop digging”—particularly when Members on the Government Benches are looking so miserable.
I hope the Minister has listened to what has been said. In order to be helpful—and recognising that it was, perhaps, lack of attention to detail and unintended consequences, rather than malevolence, that prompted the Government to introduce these proposals, which would affect jobs and the economy—I beg to ask leave to withdraw the clause, but I shall press other new clauses in this group to a Division.
Clause, by leave, withdrawn.
Mr MacNeil
The hon. Gentleman makes a good point. I hope he will join me in the Lobby, because if it is good enough for Scotland, surely it is good enough for Kent. We are happy enough for it to be devolved to Kent if it wants it. We are not the type of people to want a power for ourselves that we would deny to others. We are not the type of people who would give it to Northern Ireland but not to Scotland.
The amendment is straight and to the point. It would allow the Scottish Parliament to set APD rates for Scotland. By passing it, under the rules in the Scotland Act 1998, the Treasury would redirect those specific funds to the Scottish consolidated fund instead of to a UK consolidated fund. With this economic lever, we in Scotland would have the ability to set our own rates, although owing to legal reasons we could not increase them—but frankly why would we? Higher rates of such taxes and the punitive fuel duty can only increase inflation and reduce productivity.
The evidence is growing in our favour. My office has discovered that Scotland has been getting the short end of the stick on non-EU flights. According to the Department for Transport, Scotland has only four non-EU direct routes—air routes that fly in and out of Scotland to a non-EU country. Let us compare that with our Celtic and Scandinavian neighbours. Norway and Ireland are connected to key emerging economies such as Russia, and Denmark is connected not only to Russia but to China, Japan and 24 other non-EU countries. Norway has connections with about 15 non-EU destinations, and Ireland with about 10, while Scotland is trailing with four. It is remarkable, given all this, that Edinburgh is such a successful financial centre. Arguably, Scotland was comparatively better connected in the days of the Icelandic sagas than it is now, with the Westminster Government controlling APD.
The UK Government are responsible for the negotiation of air routes with other countries. In short, Governments agree to routes in international air agreements and later decide where the routes go. In that capacity, the Westminster Government have failed Scottish airports. For more than 65 years, Governments have argued for more and more routes to the south-east of the UK, with only a handful making the road north of the M25. Devolving APD would take the pressure off Heathrow, with the calls for a third runway. Given that Monday is St George’s day, this measure would be almost a St George’s day gift from the SNP to the people of the south-east of England.
Cathy Jamieson
Before the hon. Gentleman moves on to other things, I wonder whether he might say a bit more about the relationship with his Celtic friends, as several amendments in this group affect Wales. Would it not make sense to look at the issue when the Silk commission reports, given that it is looking at a range of fiscal issues concerning Wales?
Mr MacNeil
I am glad that the hon. Lady seems to support devolving air passenger duty to Wales. Perhaps that could be extended to Scotland as well.
Without the ability to negotiate our own air routes, we therefore need other economic levers to attract businesses and travellers to Scotland. The current situation forces business and travellers to commute to Scotland via one of the most congested air hubs in the world. The south-east can absorb the impact of an 8% increase in air passenger duty. With the countless flights that go through London everyday, it would take a very severe drop in tourism indeed to affect travel through London. However, given that Scotland has already seen a serious decline in air routes—from BMI pulling out of Glasgow, as well as Ryanair—we have to think about the impact that the APD rise will have on us.
Mr MacNeil
I am sorry, but given the time I will take no further interventions.
Three airports support the devolution of air passenger duty, as do the chambers of commerce. They want it to be independently controlled in Scotland. They will be frustrated by what the House of Commons in London will probably do this evening, when I press amendment 61 to a vote. Frustration is a negative, but in my view this will have a positive outcome. Members who cannot yet understand the rising support for Scottish independence can surely see that those who are frustrated about APD this evening will begin to see a better way of dealing with the allied intransigence from London, on this and other matters, large and small. That will be one of the many reasons why people will vote for Scottish independence in 2014—to move the Scottish economy and Scottish connectivity forward.
I only hope that I have aided Members in understanding that this is not an SNP call: we are only a vehicle for the community of Scotland, along with the three airports and the chambers of commerce, in improving industry and creating better chances for families. The amendments in my name and those of my hon. Friends therefore seek to stop the increase in APD and to continue the pattern of devolving things to the Scottish Parliament, which is a more sensible locus for controlling air passenger duty.
Cathy Jamieson
I shall keep my remarks brief in order to give other Members an opportunity to speak. I have listened to the hon. Member for Na h-Eileanan an Iar (Mr MacNeil) and, as I said in an intervention, it is important that we should have an opportunity to look at this matter in the round. Given that a recent review of air passenger duty resulted in no changes being made, I hope that the Minister will take this opportunity to consider taking a further look.
Phil Wilson
I have a small airport, Durham Tees Valley airport, in my constituency. The problem with air passenger duty relates to regional airports, and I believe that we need a UK solution, rather than a Scottish solution or a Welsh solution. There are specific reasons for the arrangements in Northern Ireland. We need a duty that reflects the needs of the regional airports outside the south-east of England.
Cathy Jamieson
That is exactly the point that I was going to make. I understand the strength of feeling in Scotland on this matter. I also understand the situation in Wales. I understand why people want to grow the economy there, and I could talk about a whole range of issues relating to that. I shall resist the temptation, however, and stick to the matter in hand.
The workings of the Silk commission could provide an opportunity to look at this matter. There are also opportunities to do so in Scotland. The Labour party there has said that it is not against the notion of further devolution in principle, but it would have to be done for common-sense reasons and at the right time. My hon. Friend the Member for Sedgefield (Phil Wilson) has just made a sensible point. Every part of the UK arguing for its own small bit of devolution would not provide a joined-up solution or a common-sense approach to growing the economy; it would be unhelpful.
Will the Minister tell us whether, having listened to the debate tonight, she is minded to look again at the matter, given that the review produced no change? Perhaps she could look into the matter, taking into account the points that have been raised not only about Scotland and Wales—vital though they are—but about other parts of England.
Miss Smith
My hon. Friend makes a fine point, and I acknowledge it in what I am saying about the regional aspects of the debate and the necessity of aviation in many different parts of the United Kingdom.
Cathy Jamieson
Briefly, I heard what the Minister said about looking again at the whole issue of devolution. Does she accept that there is also a need to look at aviation taxation generally in the round? Does she have any plans to do that, as well as looking further at the question of devolution?
Miss Smith
In brief, all taxation is, of course, kept under review. If the hon. Lady will allow me, I will proceed and I shall endeavour to answer her other points in doing so. My main point about the potential devolution of APD is focused on the wider-ranging impact such a move might have across the whole of the UK economy. We should not run the risk of replicating the same problems that Northern Ireland has faced with its land border and lower taxes in the Republic.
Let me reiterate here today the Government’s determination to examine the full range of effects that the devolution of APD could have on Scotland, Wales and the UK as a whole before any final decision is taken. As I think the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson) knows, this sits in context with a number of other pieces of work that the Government are doing on aviation.
Let me briefly deal with the issue of rates, which the lead amendment is designed to alter. Hon. Members will know that the Government were able to freeze APD for a year in March 2011. At the high cost to the Exchequer of £140 million, I think people will appreciate that this was not easy. Looking to the future, if we are to stay on course with our deficit reduction plans, it is necessary for APD rates to rise. The fact of the matter is that, over the two years 2011-12 and 2012-13, the increase in APD rates equates to a rise of no more than inflation. Indeed, most passengers will pay only £1 more on their flights. That increase is necessary. To provide greater certainty, we have also set out in this Budget the APD rates for two years up to 2013-14.
Let me move on briefly to other issues in the amendments. As I said earlier, passengers on business jet flights currently do not pay APD, whereas ordinary passengers aboard commercial flights do. We have recognised that anomaly, and are introducing fair changes to include business jet flights for the first time.
I have touched briefly on the changes that we are making in relation to Northern Ireland. I think that they have been welcomed by Northern Ireland Members here tonight, and by others outside the House.
The Government have listened, and have taken on board many of the concerns that were expressed during the recent consultation. I believe that we are striking the right balance—
Illegal Alcohol and Tobacco Sales
Cathy Jamieson Excerpts(12 years, 6 months ago)
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Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op)
It is a pleasure to have you as Chair this morning, Ms Dorries. I congratulate the hon. Member for Hereford and South Herefordshire (Jesse Norman) on securing the debate, and on giving a very good outline of some of the issues.
We have heard a wide-ranging debate covering the amount of money lost to the Treasury through illegal sales of alcohol and cigarettes, and also issues relating to health, smoking, alcohol and so on. I will not stray too much into that territory. However, I was a member of the Scottish Government when Scotland was the first part of the UK to introduce a ban on smoking in public places. That ban was not universally popular at the outset, but I think it has been proved to be the right thing to do. The idea that some policies on health are unpopular but ultimately turn out to be the right thing to do has run through the debate, and I may return to it.
The hon. Member for Hereford and South Herefordshire made the point that this is the tip of the iceberg. People try to avoid paying their fair share of tax in a whole range of areas. Illegal alcohol and tobacco sales are an important part of that, but not the only part. I think the hon. Member for North Antrim (Ian Paisley) mentioned that people try to avoid the appropriate duty on fuel, as well as on tobacco and alcohol. The hon. Member for Hereford and South Herefordshire talked about shops selling under the counter and the amount of goods seized, and how those shops and premises are back in operation a few weeks later. That not only results in a loss to the taxpayer, but has very little deterrent effect. It almost sends a message to people that they can pretty much do what they like—they can take it as a business loss and simply get back up and running again, rather than changing behaviour. I think that the hon. Gentleman felt that there needs to be a change in legislation.
I was surprised that the issue was seen as one for the Treasury Minister only. Tie-ups happen between Her Majesty’s Revenue and Customs, the UK Border Agency, police and local authorities in terms of licensing and trading standards, which indicates that this is a wider issue than just money lost to the Treasury. Many hon. Members have talked about a cross-cutting approach, and that is worth considering.
The hon. Member for North Antrim gave a very powerful description of this serious multi-million pound organised crime industry, if I can call it that. Of course, we will always see situations where some people will try to make a few extra pounds for themselves at a local level by bringing back a quantity of cigarettes or alcohol products if they have been in another country. However, it is absolutely right to focus on those who are seriously involved.
As the hon. Member for North Antrim will be aware, when businesses are shut down as a result of effective action, product substitution occurs: they move on to another product to make money to fund whatever other activities they wish to fund from the illicit gains. Therefore, these issues sit across Departments. I hope that the Minister will say how she will ensure that the Government are able to deal with issues that relate not just to the Treasury—of course, such issues are very important—but that they will begin to consider the deterrent effect of appropriate sentencing for those who persist in breaking the law.
Closure orders were considered in Scotland, particularly in relation to alcohol. For premises that persistently sold to underage drinkers or persistently broke the licensing laws, legislation was introduced to provide the opportunity to shut them down—a message to the retailer and to the local community.
Jesse Norman
To be clear, that would close down retailers who have breached the law by selling to underage drinkers, but are otherwise legal in their operations. I also have it in mind to target retail outlets that are not doing any legal trading—they have been set up simply for the purposes of the illegal sale of alcohol and cigarettes.
Cathy Jamieson
I hear what the hon. Gentleman says, which is very important because there are two separate issues. If an operation is set up simply for the purposes of selling illegal products or trading illegally, that should be taken very seriously with the full force of the law, not only with an appropriate sentence when it is brought to court, but with the ability to act quickly to stop these activities. That needs to be considered.
The hon. Member for North Antrim talked about the report published by the Northern Ireland Affairs Committee. I will certainly read that with interest, as I am sure other hon. Members will. His contribution, and the contributions of my hon. Friend the Member for Stockton North (Alex Cunningham) and the hon. Member for Bristol West (Stephen Williams), highlighted the consideration of smoking policies more generally as they relate to health, as well as to business and trade.
There was a fairly lively debate on the issue of plain packaging. I am not a smoker. I have never been a smoker, and in my former careers I took a fairly dim view of smoking generally. Therefore, I think that the Government should take an interest in anything that can be done to deal with health issues, but it must be done in a way that makes sense and is enforceable. I take the point that many people who work in the industry are worried about their jobs. We have to have some cognisance of that in our discussions.
My hon. Friend the Member for Stockton North mentioned some of the work that was done by the Labour Government. I had no wish to make this a party political debate—that is not a criticism of my hon. Friend—because I think all hon. Members share common ground in trying to deal with these important issues.
My hon. Friend also raised one of the more serious issues: the so-called tab houses, which have been the subject of responses to parliamentary questions and on which work has been done previously, with a particular focus on the introduction of children to smoking. We are also concerned about whether children and young people are being introduced not just to smoking, but to crime, drug misuse and other activities in which they should not be involved.
In debating these issues, it is important that we do not focus simply on packaging. There will be different views about how much packaging and branding impact on consumer behaviour—I am sure that there are plenty of PhD theses about that, even if they are not in this room—and that debate will continue. One important point, which my hon. Friend mentioned, is how we deal with the problems of criminality relating to these issues. Again, I do not wish to make this a party political point, but the appropriate number of people must be involved in intelligence-led policing and the joined-up approach between policing, trading standards, licensing authorities and the UK Border Agency. There would be concern that elements of that approach rely on many people who are sometimes described as the backroom staff in police forces. None the less, they are the ones who gather the intelligence, analyse the data and information and do the forensic work to track down some of those involved in serious and organised crime. That will be important as we consider a way forward.
As well as discussions on smoking and the impact on health, we also heard from the hon. Members for Great Yarmouth (Brandon Lewis) and for Burton (Andrew Griffiths), the chair of the all-party parliamentary beer group, particularly about duty stamping. Again, that is controversial and both hon. Gentlemen are putting forward viewpoints on how this would work in practice and what the impact on the industry would be. Will the Minister reply to the hon. Gentlemen’s questions, which I should also like to pose?
We heard about some technical issues in respect of duty stamping and whether it would be the correct option. Have the Minister and her colleagues considered forming a working group, bringing together different industry interests to look at what is technically the best way to work on avoidance of duty and whether duty stamping is the correct way to take this forward? If other options are being considered, perhaps the Minister could lay those out for us today, because we will have to consider this matter in more detail as we debate it, following on from the Budget.
Overall, we have had a useful debate. It is clear that there are different interests and views across the political parties, and within them, particularly on plain packaging on cigarettes. I should like briefly to highlight another issue relating to tobacco. Work done by HMRC on avoidance considered what it called the tax gap. In 2009-10, the spirits duty gap was 3.4%, the beer duty gap was 14%, the gap in cigarette duty was 10% and in respect of hand-rolling tobacco the duty gap was estimated at 46% and had reached a high point of 50% in 2008-09. We have not looked at that in detail this morning. None the less, there could be greater focus on that area as we move forward.
In conclusion, we have had a good debate. We have covered smoking and issues to do with the duty stamp, about which, I hope, we will get more information. We have heard about enforcement issues and about how we have to take health policy into account. We have heard how important this matter is for the Revenue and for business. But the important message that must be taken away by the Government is that we have to find solutions to all the problems that have been identified. I reiterate the point that has been made: having a lead Minister or someone identified to work on the cross-cutting agenda and take this forward would assist the process. I hope that the Minister addresses that point as well as the other questions that have been raised this morning.
Pay and Consultants (Public Sector)
Cathy Jamieson Excerpts(12 years, 6 months ago)
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Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op)
It is a pleasure to serve under your chairmanship once again, Mr Howarth.
I congratulate my hon. Friend the Member for Hammersmith (Mr Slaughter) on securing the debate and on giving us an extensive and forensic tour around local and national concern. He said that his speech would be both interesting and controversial. Actually, it has been helpful that there have not been too many controversial issues. Perhaps there is more agreement than disagreement, notwithstanding some party political points. My hon. Friend talked about the financial, the moral and the legal practices in relation to some contracts in the public sector and to absolute levels of remuneration. They have been reflected in the contributions of various hon. Members. He was clear that he was most concerned to focus on deliberate avoidance and evasion and the improper use of the rules, or attempts to use the rules improperly, to benefit individuals.
I have worked in the public sector. It would never have occurred to me, when I worked in a senior post of a local authority social work department, to set myself up as a company and contract my services to that local authority. I was brought up—this was mentioned by a number of hon. Members—with a public sector ethos that recognised that working in the public sector made us accountable to the local taxpayers who paid our wages.
The hon. Member for Shrewsbury and Atcham (Daniel Kawczynski) made a distinction between the private sector and the public sector. I hope that he feels that the private sector ought to have a set of business ethics. Everyone operating in the private sector ought to take account of that. It is not simply about squeezing as much as possible out of employees because they happen to be in the private sector.
We heard that people are angry about such arrangements. They are angry because they feel that low-paid workers, particularly in the public sector, are suffering the squeeze more than those at the top. The Minister will recall that I raised this issue last week at Treasury questions. I asked what the Government are doing to ensure that they deliver on their promise that the lowest paid public sector workers receive the £250 a year pay rise that they believed they were going to get. We also need to ensure that we do not have a further expansion of excessive pay at the opposite end.
Perception is an issue. The public understand that people whose primary job is with a local authority or public body—whether nationally or locally—and who are being remunerated by it, should pay their fair share and be involved in a proper, transparent arrangement. The public become concerned when it looks like individuals or companies have set themselves up in a particular way to benefit themselves financially, and are not paying their fair share.
In response to points made by the hon. Members for Shrewsbury and Atcham, for Wimbledon (Stephen Hammond) and, in his brief contribution, for Hexham (Guy Opperman), I do not think that anyone is suggesting for a moment that everyone who is self-employed, works as a consultant or in such organisations, is “at it”, to use a term used on the streets of my constituency. There are many people who add value, who can offer very specialist knowledge and expertise and who can be paid through appropriate contracts in the public sector. However, there is genuine concern about some of the arrangements, which we heard about in the forensic contribution by my hon. Friend the Member for Hammersmith, whereby it is clear that people are contracted to do a particular job and, in any reasonable definition, would be seen as employed by the public sector.
Some hon. Members mentioned IR35, which not only affects people in the public sector—I do not intend to deviate from the subject of the debate other than to mention the review of IR35—but many small businesses. There are many situations where people, who are either self-employed or in small businesses, find themselves at odds with HMRC when dealing with definitions of how tax should be collected and paid. I hope that the Minister will say a bit more about the progress on IR35, and how it will be modernised and changed. A quick look at the Treasury website showed me that, far from the situation being simplified, there were about 40-plus—I lost count—different guidance notes on IR35 that would have to be interpreted to decide whether someone was an employee or not. That is not helpful and gives rise to speculation that such guidance is not necessarily there to help people, but to help people avoid the payment of taxes. Many small businesses feel that they are currently being pressed, unlike some of the arrangements we have heard about this morning.
I am conscious of the time, so I will not go through, point-by-point, everything that was raised. Clearly, there have been situations over a number of years—I do not think that anyone particularly wanted to make a party political point—and the general public, understandably, feel that they are taking the pressure to do their bit on deficit reduction. I do not always feel that we are all in it together. It is not fair that those on the lowest pay are set to lose some of their benefits. As was pointed out, those on the lowest pay are feeling the squeeze and do not have a living wage. We are not focusing on pay at the top or the ratio—the difference—between those on the lowest pay and those on the highest pay in the public sector. We should do everything possible to ensure that there is openness and transparency.
There is a place—perhaps not all my colleagues agree—for using specialist expertise and consultants on a short-term basis to add value to the public sector, but that must be done openly and transparently, with proper processes in place. We should never allow people to use the rules and regulations to avoid paying the appropriate tax or to benefit themselves—that is not what the public expect.
Finally, I have already mentioned IR35. Will the Minister say what action has been taken to ensure that, across local authorities, there will be no other examples of the type of practices that give rise to public concern? What will the Government do to monitor them in the future?
The Economic Secretary to the Treasury (Miss Chloe Smith)
It is a pleasure to serve under your chairmanship, Mr Howarth, in an important debate to which hon. Members have contributed with some thoughtfulness. I should like to mention my entry in the Register of Members’ Financial Interests for 2009.
Hon. Members are aware that we face a tough challenge to repair the damage to our economy resulting from the recent crisis. Restoring the economy to prosperity requires restraint in many sectors of society. It is right that public sector pay restraint plays a part in that fiscal consolidation. I shall start with general pay restraint and then refer to various areas mentioned by hon. Members.
I am confident that all hon. Members agree that public servants do a crucial job delivering the high-quality public services on which we all rely. It is right that we continue to offer rewards to those who have skills that would help and assist all our constituents who need those services. At the same time, however, given the pressures on public finances, public pay restraint can help to protect jobs and services in the public sector. That is why, in the June 2010 Budget, the Chancellor announced that there would be a two-year pay freeze for public sector workers earning more than £21,000. At the autumn statement, the Chancellor announced that, for the two years following the freeze, public sector pay awards would average 1%.
On senior pay restraint, it is particularly important, in a context of overall pay restraint, that senior managers show leadership on pay. That is why, at the first meeting of the coalition Cabinet, Ministers announced that they would take a 5% pay cut and that their pay would be frozen for the rest of the Parliament. In May 2010, it was announced that the number of senior civil servants receiving bonuses would be reduced by two thirds, which I am sure hon. Members welcome. At the same time, it was also announced that the Chief Secretary to the Treasury would sign off any appointments for those earning more than £142,500, in areas where Ministers control pay. Of course, much of what we are discussing today can only cover the areas where central Government have control over pay. There is a certain amount of complexity in that landscape to which I may not have time to do justice, but I hope that hon. Members will understand what the Treasury could comment on today.
The Government asked Will Hutton to review senior pay in the public sector. The Government accepted his recommendation that Departments publish a top-to-median pay multiple each year, and Departments will include that as part of their annual reports from this year.
Likewise, the Government are also clear that any consultancy arrangements in the public sector should provide good value for money. In May 2010, we announced that the Cabinet Office and the Treasury would join forces to drive out waste, through a new group called the Efficiency and Reform Group. One of that team’s first priorities, with immediate effect, was to freeze all new consultancy spend unless it was an operational necessity. Where such spending was proposed, ministerial sign-off was required for £20,000 or above. This spending control remains in place. Because of that decision, in the 10 months from May 2010 to March 2011, £870 million was saved through a reduction in consultancy spending by central Government. I am sure that hon. Members welcome that.
On tax avoidance by senior staff, which has been of interest to hon. Members throughout this debate, the Government have been clear that we are committed to tackling all forms of tax avoidance. We do not believe that tax avoidance is appropriate in the public sector. Indeed, it is expressly forgiven—[Interruption.] It is expressly forbidden—I hope Hansard can hear this—in a document entitled “Managing Public Money”, which I know hon. Members have as their bedside reading. The hon. Member for Eltham (Clive Efford) asked whether an NHS trust would be covered by that guidance and I confirm that that would be so. All bodies covered by that guidance are covered by the Chief Secretary’s review, which has been mentioned in the debate.
The review occurred after it came to light that a senior public servant had been appointed in way that could be perceived as minimising his tax. The Chief Secretary therefore announced a review of the tax arrangements of senior public sector appointees. This review will consider the extent to which use is made of arrangements whereby the tax position of appointees can be perceived to be minimised, and will make appropriate recommendations. The review will include individuals being paid through PSCs, to use an abbreviation relevant to this debate.
Several hon. Members, including my hon. Friend the Member for Wimbledon (Stephen Hammond), have mentioned that there is much complexity here that the review should reasonably take into account. The review is not intended to be a witch hunt.
The hon. Member for Kilmarnock and Loudoun (Cathy Jamieson) asked specifically about IR35. She will know that in the Budget last year, following a review by the independent Office of Tax Simplification, the Chancellor announced that IR35 would be maintained, but that Her Majesty’s Revenue and Customs will take forward options for improving its administration. That is a separate point, but I hope that that answers the hon. Lady’s question.
Cathy Jamieson
I thank the Minister for that clarification, but I hope that she offers slightly more information in terms of how the administration will be improved and whether any of the guidance will be changed.
Oral Answers to Questions
Cathy Jamieson Excerpts(12 years, 7 months ago)
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Danny Alexander
My hon. Friend makes an interesting point. She will also recognise that local authorities have a duty to maintain sufficient child care to meet the needs of working parents in their area. The Department for Education is to undertake a review to ensure that that is happening.
Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op)
Many women facing high child care costs are low-paid workers in the public sector. We wrote to the Chancellor in January, calling on him to write to the pay bodies to ensure that by being tougher at the top, we can help to protect lower-paid workers in 2013 and 2014. Can the Chief Secretary to the Treasury tell us whether the Chancellor has taken that action, and whether he will deliver on his promise that, as he delivers pay restraint, he will do more for the lowest-paid public sector workers?
Danny Alexander
The hon. Lady will recognise that, during the pay freeze of last year and the coming year, we have provided a £250 pay increase for those earning less than £21,000 a year. The pay review bodies have been asked to provide advice in relation to the future pay remit, but she should also recognise that the increase in the income tax personal allowance, which will come through this April, will be worth £126 this coming year to precisely the people she is talking about. I hope she welcomes that.
Living Standards
Cathy Jamieson Excerpts(12 years, 7 months ago)
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Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op)
Let me begin by thanking everyone who has taken part in the debate. It is clear from the level of interest that has been shown, the number of Members who have spoken, and the number who were not able to do so that we were right to raise these issues in the House today.
We heard passionate speeches on behalf of constituents from my hon. Friend the Member for Wansbeck (Ian Lavery), the hon. Member for East Antrim (Sammy Wilson) and my hon. Friend the Member for Hackney South and Shoreditch (Meg Hillier). We also heard thoughtful contributions from my hon. Friends the Members for Edinburgh East (Sheila Gilmore), for Chesterfield (Toby Perkins), for Inverclyde (Mr McKenzie) and for Oldham East and Saddleworth (Debbie Abrahams)—and, indeed, from the right hon. Member for Wokingham (Mr Redwood), although I began to be worried about the number of occasions on which he seemed to be agreeing with the Labour party. Unfortunately, we also heard some of the same old rhetoric from, predominantly, Tory Members. It is time that the Government took responsibility for what is happening on their watch.
We heard from Members what their constituents tell them. We heard, for instance, that it is not simply a case of being able to secure an extra few hours for those who are on 16-hour contracts. We did not hear from Ministers where those extra hours were to come from, although they were pressed on the issue. We heard the views of charities such as the Child Poverty Action Group and organisations such as the Institute for Fiscal Studies, and those of trade unions, particularly the Union of Shop, Distributive and Allied Workers. We heard about the difficulties experienced by people who are already on low incomes and are trying to make ends meet, while fearing what will happen when their working tax credit is cut.
It is sad that we heard that same tired, out-of-touch rhetoric from many Government Members. It just shows that they do not understand what it is like for families who are trying to make ends meet while facing problems such as ever-rising prices. Some Government Members are shaking their heads. Let me deal with a few of the points made by the Exchequer Secretary in his opening speech. He seemed to suggest that it was reasonable for couples to work 24 hours rather than single parents working 16 hours, but, as I said earlier, he did not give us any indication of where those extra hours were to come from. In response to an intervention, it was suggested that people could simply change jobs and that there are always jobs out there. We Opposition Members are concerned about unemployment, and we would like to know where those jobs are now, and where they are going to come from—and I suggest that Government Members should try explaining that to the millions of people who are already out of work.
It was also suggested that the raising of the personal allowance was going to make a big difference. I gently say to those who made that point that people who are working 24 hours or fewer on the minimum wage will not benefit from that, and that this measure does not serve as an argument for cutting the working tax credits of people on low incomes.
The Exchequer Secretary and others used the word “fairness”; indeed, he suggested that it was at the heart of everything he did—and he said that with a straight face, which I found astonishing given what the Government are doing. Far from everyone being in this together, people cannot understand why David Cameron and George Osborne have chosen to give the banks a tax cut at the same time as their Budget measures are hitting women harder than men and are pushing up child poverty.
We heard during the course of the debate that families with children are set to lose an average of £580 a year from policies coming into effect this April alone. Some Government Members may think that £580 is not much money, as for them it may merely mean cutting back on a few luxuries, but for ordinary families in ordinary houses in ordinary streets in the cities, towns and villages Opposition Members represent, £580 may well make the difference between those families being able or not being able to pay their electricity or gas bill, or buy shoes for their children, or ensure that they can go on the school trip. That sum may be what enables them to provide a decent standard of living—not luxuries, but the necessities of family life.
Next month’s Budget must pass two tests: on jobs and growth, it must boost our economy and put in place the long-term reforms that we need; and on fairness, it must ensure that families on low and middle incomes do not bear the heaviest burden. The Government have not explained how it can be fair that working families on the lowest incomes who are trying to do the right thing are going to lose out.
I repeat our call for a plan for jobs and growth in the Budget, and I look the Economic Secretary in the eye and ask her whether she will press the Chancellor to think again on the changes to tax credits and child benefit, which will cost families with children up to £4,000 per year. Will she urge him to abandon the changes in eligibility for working tax credits that are set to hammer hundreds of thousands of parents in part-time work by up to £74 per week and put them in a situation where work will not pay? Will she say to both her constituents and mine that the Government will pull back from the plan under which, from April, couples who have children and who are earning less than about £17,700 will need to increase the number of hours they work from a minimum of 16 hours to 24 hours per week, or they will lose all their working tax credits? Will she say how she will create the fairness that her colleague, the Exchequer Secretary, talked about? If she believes people should be better off in work, how can she support a change that will penalise about 275 families in her constituency who are working and trying to do the right thing, but who cannot increase their working hours at a time when the economy is flatlining and unemployment is rising? Does she agree that this unfair and damaging change could, and should, be cancelled? We want a straight answer to that question from her.
I also press the Economic Secretary again on whether she has asked David Cameron and George Osborne to review urgently—
Mr Speaker
Order. May I gently say to the hon. Lady that she should refer to Members of the House not by name, but by their title?
Cathy Jamieson
I apologise, Mr Speaker. I am afraid I got carried away in the heat of the moment. I should have asked whether the Economic Secretary will press the Prime Minister and the Chancellor to review urgently their planned changes to child benefit, which are unfair, unworkable and ill thought through.
As we have heard time and again in this debate, it cannot be right that a two-earner family each earning £42,000—a total of £84,000—would keep all their child benefit, but a single-earner family on £43,000 would lose it all at a stroke. When the Exchequer Secretary was asked to explain that, he seemed to indicate that it was a bit of a challenge, but he did not say how he was going to solve it and how he would remove that burden from the poorest. The Government should put the implementation of their child benefit cuts on hold and conduct an urgent review that will report before their changes come into effect next January.
Labour Members did not come into this debate only to score political points in this Chamber, notwithstanding what some Government Members have said, or only to put this Government under pressure, although we have done both those things; we did so because we want the Government to listen. We want them to stop what they are doing, to re-examine the issues and to come back with a fairer alternative. There now seems to be some dispute at the heart of the Government; I listened to what was said in questions earlier today, when I heard the Secretary of State for Work and Pensions seem to blame the Treasury, and reports tonight suggest that No. 10 and the Treasury are at odds over this. The Government’s own internal brief is for them to sort out, but either way the problem is of their own making. Perhaps they thought they would get away with it —although, again, we are hearing reports tonight that perhaps the Chancellor never really intended to implement these changes but the problems in the economy mean he is now not able to back away from them. If the Government do not listen today and they fail to act, they will be confirming that they are out of touch and that they have no understanding of the realities of life for families. There are families up and down the country who simply will not forgive them.
Remuneration of EU Staff
Cathy Jamieson Excerpts(12 years, 7 months ago)
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Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op)
It is a pleasure to face the Minister across the Dispatch Box this afternoon, after being side by side with her this morning at the Rehab Group’s parliamentary pancake breakfast. Neither of us was able to run in the race, so we did not have that kind of competition this morning.
Mr Speaker
With reference to the annual adjustment of the remuneration of EU staff, I feel certain.
Stephen Pound
On the subject of the annual adjustment of the remuneration of EU staff, my hon. Friend may be aware that when the MPs team won this morning, that was the sole topic of discussion.
Cathy Jamieson
I had better not incur the wrath of the Speaker by commenting, other than to congratulate those MPs who were able to take part. I note that, apart from my hon. Friend, none of them is here to participate in the debate. Perhaps they are recovering.
I begin by thanking the European Scrutiny Committee for recommending this for debate on the Floor of the House and for the work it has done in scrutinising these documents. European institutions can sometimes seem remote and impenetrable, but as we are aware, the workings of the EU in general, and of the Commission, have a significant impact on a range of issues that affect us all. We also know that the EU produces a huge volume of documents, and members of the European Scrutiny Committee do us a service by examining a number of those in detail, and recommending debate on the Floor of the House where there are further questions for the Government to consider.
The Committee’s reason for drawing attention to these documents relates to a number of specific concerns: first, the process that has led us to the position where once again we might see a legal battle between the Commission and the Council in the European Court of Justice; secondly, the Commission’s view that there was no justification for invoking the exception clause; and thirdly, questions about what action the Government have taken, and will take, regarding the negotiations on the amendment of Annex XI.
As the European Scrutiny Committee recognised, the documents are technical in content, but they nevertheless raise issues of far greater political importance. In properly scrutinising these documents, it is important to understand their background and history. The Minister has already covered some of that territory and I will not seek to repeat it. However, it is worth highlighting some of the context again, because it is entirely linked to the wider economic situation we face.
In less difficult financial times such documents, which essentially put in place the necessary paperwork for salary upgrading, might have passed, if not entirely unnoticed—the Scrutiny Committee would always have had an eye on them—at least without significant comment, except from Members who view anything to do with Europe as by its nature a bad thing. I do not take that view, but we are in a climate where there is justified anger at excessive pay, outrage at bankers’ bonuses and a general feeling that staff who are already highly paid should not get extra rewards simply for doing their job properly.
Mr Cash
Is there not a further point on economic performance arising from the hon. Lady’s comments? The calculations being made are based on the assumption that there is reasonable growth in the European Union, which simply is not the case. It falls on economic as well as legal grounds.
Cathy Jamieson
The hon. Gentleman makes a useful point that I will address in greater detail later.
Being somewhat older than the Minister, I can recall the days when the so-called Eurocrats were high on the hit list of public anger, as salaries and conditions in European institutions were perceived to be far more generous than those enjoyed at home. Some of the most highly paid officials might be relieved that they are no longer the focus of that anger as bankers and others have taken over. However, the subject of EU salaries and pensions remains important. As the European Scrutiny Committee has highlighted, it is clear that this subject needs greater clarity and resolution. As we have heard, the Commission took the Council to the Court over EU salaries and pensions in 2009, and only last month it announced its intention to do so again. In advance of today’s debate, I asked the House of Commons Library about the costs involved in the last case. I was told:
“There is no straightforward way of getting a figure for the costs borne by the Council in Case C-40/10.”
I was also told that the Library had attempted to obtain information, but the Court had said that
“replying would be a massive undertaking that will require all sorts of cost allocation analyses (within the Commission’s legal service and the European Court of Justice), at great expense to European taxpayers”.
The Court might be unable to tell us exactly how much that wrangling cost, but it is clear that any legal fight will have come at great expense to the taxpayer. The questions that taxpayers will no doubt ask is whether that ping-pong between the Commission and the Council is really the best way to resolve such matters, and I was pleased to hear the Minister refer to that. However, taxpayers will want to know exactly what the Government have done in the past year to push for reform so that we are not faced with this annual tit for tat and ongoing uncertainty.
The second area of major concern for the European Scrutiny Committee was the Commission’s decision not to provide for an alternative salary adjustment in its 2011 report and the basis on which that decision was taken. Members of the Scrutiny Committee amplified their concerns in the conclusions of their report of 2 November by describing the assessment required of the Commission in considering the exception clause as appearing to be a one-sided exercise.
There are different opinions on Europe across the political parties, and indeed within them, but there is one thing that I am sure we can agree on: times are now tough across Europe. GDP fell throughout Europe at the end of the previous quarter, unemployment in the eurozone is at a record high and we continue to face uncertainty surrounding the eurozone crisis. In reality, apart from those at the very top, people in work in both the public and private sectors are already experiencing those tough times, and families are bearing the brunt. Every day we hear that small business are struggling, and they consistently report that they cannot get the finance that they need or, indeed, previously had. It is becoming harder and harder for people to buy their first home, with the deposits required now out of reach for many young people starting out in family life.
Yet, despite that wider economic climate, the Commission did not deem the general economic outlook in Europe to be an “extraordinary situation” as defined by the European Court of Justice. Try to explain that to the low-paid couple who are set to lose about £4,000 in working tax credits when they hear that a highly paid official could gain an extra £4,000 under the proposals.
If we are not in an extraordinary economic situation, what would make for one? We have to question why it is deemed correct to ask hundreds of thousands of public sector workers in the UK and throughout Europe to take the hit and to face a cap in their pay and an uncertain future, while no similar restraint is shown by the EU institutions.
Another part of the problem is that, owing to the structure of the current arrangement, annual adjustments are implemented across the board irrespective of salary levels, meaning that a high earner who is already on £200,000 will receive thousands of pounds more under the proposals.
The Opposition have made it clear that financial discipline in the public and private sector must be accompanied by fairness, and in terms of salary scales, just as at home, we must be tougher on those at the top to help protect those at the bottom. Have the Government made representations on that point during any part of the negotiations?
I agree with the European Scrutiny Committee that the process smacks of being one-sided, and it could be argued that the Commission’s conclusion that we do not face extraordinary times has made a mockery of the exception clause, so urgent reform is clearly needed.
That brings me to my next point, and the Committee’s third area of concern: the Government’s action and representations on the issue. We hear a lot from the Government, as we have again today, about them taking a tough position on EU administrative expenditure and wanting to see real budgetary restraint in the EU over the coming years. They spell that out in their memorandum on the subject, and they go on to express dissatisfaction with the substance and procedure of the salary and pension adjustment proposals, making the point that the formal proposals were first circulated only on 24 November 2011 but required Council approval by the end of the year.
Again today, although we have heard a great deal about the facts of the situation, we have not heard in detail how the Government intend that tough position to manifest itself, or who exactly they are going to be tough on. The fear and worry for many will be that this is just another example of talk but not necessarily action on Europe by the Government, so I should like to hear from the Minister how the Government expect to take the lead in talks on reform at a time when the UK’s political capital in Europe is at its lowest in a generation.
In recent months we have seen how the Prime Minister’s actions have left Britain somewhat isolated in Europe, because leading up to last December’s summit he did not appear to put any real effort into alliance building.
Mr Stewart Jackson (Peterborough) (Con)
The hon. Lady’s argument would gain more conviction were it not for the record of the Government whom she supported, because those issues, particularly the structural issues in terms of the European Union institutions, did not begin in May 2010. Does she think that the process she supports was improved by a previous Prime Minister giving away a huge rebate?
Cathy Jamieson
I have listened closely to the hon. Gentleman, but his party is now in government and it has to take responsibility for what has happened in the past year. I absolutely understand that past decisions have implications for the issue before us, but I want to focus on where we go in the future and what this Government have done in the past year. My concern is that, apart from trips to Berlin and Paris, for example, neither the Prime Minister nor the Foreign Secretary travelled to the EU’s capitals before they went to Brussels. Britain was singled out for criticism by the Foreign Minister of Poland, a country that was one of our potential allies. If we want to change things in Europe, surely we must build alliances rather than destroy them.
The Minister for Europe (Mr David Lidington)
Just to correct the record, the Prime Minister did travel to see Chancellor Merkel and President Sarkozy in the run-up to the December Council and the Prime Minister, the Deputy Prime Minister, the Foreign Secretary and other Ministers had conversations with their counterparts in a number of other member states as the Council approached.
Cathy Jamieson
I am happy to accept that correction to the record. However, I want the House to be aware of our concern that what was presented by the UK was done very much at the last minute. I hope that in future we will spend time building alliances, rather than be sidelined.
I want to focus again on the issue of budgetary restraint. The Minister has indicated that there is an intention to be tough on Europe on budgetary restraint, but we have not seen or heard the detail today of how that will happen.
The Conservative party is riven with splits. The Deputy Prime Minister has said that the Prime Minister’s behaviour in Europe risks making the UK
“isolated and marginalised within the European Union”.
The Italian Prime Minister, Mario Monti, has said that Britain will no longer be
“in the heart of Europe”
following the veto and that our “capacity to influence” events will be greatly diminished. The concern of people in the wider world is that the Prime Minister has indicated that he is willing to put appeasing his own party first and the national interest second. Let us be clear about one thing: our place in Europe and our seat at the table are too important for that. To cut ourselves off from a market of 500 million customers would be devastating to British companies. In an era of billion-person countries and trillion-pound economies, we need to find ways to amplify our voice, not dampen it.
Henry Smith (Crawley) (Con)
Is the hon. Lady really arguing that we should go headlong into whatever political alliances the European Union wants us to enter, just for the sake of free trade? Is it not the case that we are able to have free trade without surrendering sovereignty?
Cathy Jamieson
If the hon. Gentleman had been listening carefully, he would have realised that I am saying nothing of the sort. I am saying that in an era when we have to compete in a global economy, we must ensure that our voice is heard. We therefore have to take our seat at whatever table there is to put the interests of the UK forward. Where we have shared goals, such as in climate change negotiations, tackling cross-border crime and dealing with human trafficking, working together surely makes global agreements more likely. We need a mature and positive approach to Europe from the Government.
Mr Jackson
The hon. Lady is being very generous. I am rather confused by her position. Can we infer from her comments that if the Leader of the Opposition had been Prime Minister on 9 December 2011 he would have signed the treaty, or would he have followed the lead of the Prime Minister and vetoed it?
Cathy Jamieson
The hon. Gentleman will have heard the Leader of the Labour party say on numerous occasions that he would not have walked out of the negotiations. There was no treaty on the table at that time.
I want to move on, because this point is important. As I have said, we need a mature and positive approach to Europe from the Government. When we get the opportunity to work on a cross-party basis, we should do so. We should engage in Europe and build alliances so that when important issues come up, such as those that we are debating, we have credibility and influence among our European neighbours.
Cathy Jamieson
No, I want to move on. We will no doubt continue to debate the other issues that I have raised on other occasions.
To return to the topic of this debate, it is clear that the view from all parts of the House is that the issue of EU salaries and the exception clause is important. It is also clear that the dispute between the Commission and the Council cannot continue as an annual tit-for-tat with serious financial consequences.
I once again thank the European Scrutiny Committee for recommending that such an important issue be debated on the Floor of the House. I look forward to hearing what members of the Scrutiny Committee and other Members have to say, and to hearing the Minister’s response to the questions that I have asked specifically about what action has been taken in the past year and how Ministers propose to ensure that we do not face a similar situation at any point in the future.
Oral Answers to Questions
Cathy Jamieson Excerpts(12 years, 8 months ago)
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Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op)
Yesterday, we heard the Prime Minister say that jobs in retail are a vital part of the economy. Why are the Government making changes to working tax credits that will hit part-time workers in the retail sector hard? Is that a fair deal for parents who are trying to do the right thing? Can the Minister tell us how many couples who work between 16 and 24 hours a week will lose out, and by how much?
Working Tax Credits
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Jonathan Reynolds
Indeed. A family currently on £18,000 a year could lose £4,000, which is a huge loss. It will, as I understand it, push as many as half a million children back below the poverty line.
The Minister may say to me that the simple solution is for claimants to work an additional eight hours. For some people in receipt of working tax credit, the demands of caring, child care or limited health may make it difficult for them to work those additional hours. These changes make no allowance for that.
I was first alerted to the scope of this issue when I was contacted by a resident in my constituency who was hit by a car 11 years ago. He was previously employed as a printer and would routinely work 12-hour shifts a day for his family. He has not been able to work since the accident and needs some degree of care. His wife, as well as caring for her husband and their young daughter, works 17 hours a week in a before and after school club. She cannot increase her hours at the school because the club runs only for those 17 hours a week. With the caring responsibilities for her husband and daughter, she would struggle to find a second job with sufficiently flexible hours. The money they receive though working tax credit makes a real difference. Under the Government’s plan they would lose it.
I acknowledge that, rightly, the Government do not plan to increase the hours of work required by single parents, in recognition of the additional pressures they face. However, they also need to consider the impact that these changes will have on families where one member is disabled, or one member has a caring responsibility, or both. They should urgently consider whether additional exemptions should be applied. Indeed, I put a range of parliamentary questions over the past six months to the Exchequer Secretary, to try to ascertain how many of the 280,000 couples that this will affect have a partner with caring responsibilities or a disability, and to get a more detailed breakdown. However, the Government could not provide much of that information, and what they could provide was extremely limited.
As I have said, the promotion of work is at the heart of the working tax credit scheme. The principle of asking people to take on work to qualify for working tax credits is a positive one. But if the amount of work we require is unrealistic, it will hurt rather than help some of the most vulnerable people in our society.
Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op)
I thank my hon. Friend for giving way and for securing this debate. I am sure he will be aware of this, but will he comment on the point made by the trade union USDAW that 78% of the couples it has surveyed who work between 16 and 24 hours say that there is no way in which they could increase their working hours, and that the retail sector is particularly squeezed at present, meaning that overtime that may have been guaranteed in the run-up to Christmas in previous years is no longer available ?
Jonathan Reynolds
Absolutely, and I am very grateful to USDAW for its support in giving me research and case studies relevant to this debate, because these proposed changes will particularly impact on the retail and service sectors, where there is a prevalence of part-time work. They are rightly concerned about the impact it will have on their members. I have seen their tax credits survey, which suggests that 79% of their members who receive working tax credit would not be able to secure additional hours from their employers before next April. Indeed, they have already talked to members who have repeatedly tried to secure extra hours from their employers, but been told that the work is not available. Where additional hours are available they are often late at night or very early in the morning. The lack of public transport means that members cannot take them.
An added complication is that there is often a mismatch in the retail sector between the hours staff are contracted to work and the hours they actually work. In recent years there has been a trend for retailers to cut the hours staff are contracted to work, with an expectation that they will work longer, additional hours at busy periods. That means that under the proposed changes couples actually working more than the 24 hours that makes them eligible for working tax credit might not get it because not all of their hours are contracted.
I put it to the Minister that that would be completely unconscionable, and I respectfully request that she address this point when she responds to me later in the debate.
I do not yet believe that the full impact of these changes has been considered or identified by the Government. The Government claim they are still committed to ending child poverty, but this is a measure that has the potential to push many families well below the poverty line. It is a regressive step that will concern many Members.
I would hope that the withdrawal of working tax credit from those who could not secure additional work would not prompt a return to the old idea that work will not pay. But that is the risk, and that would be the tragedy, not only for the employees concerned but for the parts of industries that rely on a flexible work force willing to work just a few hours a week.
In these tough economic times I would rather that the Government reviewed their plans, but I do not think that they will do that. Instead, may I implore them to do two things? I ask them, first, to exempt couples where one partner is either disabled or a carer from these changes; and, secondly, to increase awareness of the change among employers and employees, to ensure that they have the best chance of working together so that they can fulfil the requirements for eligibility for working tax credit payments. In addition, if these changes are to go ahead, will the Minister consider what help the Government can give to the most badly affected couples in terms of transitional arrangements?
This change will impact on the lives of many thousands of struggling families, many of whom are my constituents, and I am extremely grateful to be able to highlight this matter before the House this afternoon.
Miss Smith
Let me move on to the change that the hon. Gentleman highlighted, which is the move from 16 to 24 hours. As he explained, under the current system couples with children can claim working tax credit if one partner works 16 hours a week. The hon. Gentleman will know that at the moment lone parents must also work at least 16 hours to qualify for the working tax credit. As he said, however, under the 2010 spending review, from April next year couples with children will have to work 24 hours between them, with at least one partner working 16. In response to the interventions made, this change makes the system fairer by reducing that disparity between couples and lone parents. I would not like to stand here to defend why those two groups should be treated differently. I can see the hon. Member for Stalybridge and Hyde twitching but I must move on in order to tackle two of the points he specifically asked me to address.
There are exemptions where couples may have a limited capability to work. That means that couples with children will continue to qualify for working tax credit where one member works at least 16 hours a week and that person is eligible for the working tax credit disability element. In addition, there will be an exemption for some couples with children where only one member works at least 16 hours a week and the other adult does not work, for example where one adult is incapacitated. A couple with children will continue to qualify for working tax credit at 16 hours if one partner is in receipt of disability living allowance.
Moving on to how else we can increase support for lower and middle income earners and improve the rewards to work. On work incentives, which I said I would cover, universal credit has already been mentioned and it is in that area—
Cathy Jamieson
I thank the Minister for giving way. Before she moves on to work incentives, will she address the point about low-paid workers who would find it difficult to get that extra eight hours to stay on the working tax credits, and who will potentially see their incomes drop from £18,000 to £14,000 in a year? What consideration has the Minister given to transitional arrangements or help for that particular group?
Miss Smith
The point I was about to make was that the introduction of universal credit is where the Government anticipate making the most major transitional arrangements, and I note the hon. Lady’s points—and those of other Members in earlier interventions—in particular in relation to retail sector work, for example. Everybody appreciates that the economic climate is hard at the moment—the ideal world is not out there for everybody. I take her point.
Moving on very briefly to the work incentives provided by the universal credit, the phrase has already been used that work must always pay and be seen to do so. One of the key features of universal credit—the hon. Lady will know this—is that it will be paid in and out of work, and that the hours rule will disappear to smooth the transition into work and ensure that that it pays.