Finance Bill

Chris Evans Excerpts

Tuesday 1st July 2014 Commons Chamber

[Catherine McKinnell]

I thank my hon. Friend for that intervention as it takes me neatly to my next point, which is the issue of tax avoidance. Several people share our concern that the employee rights scheme is potentially vulnerable to significant abuse. I raised that concern during consideration of last year’s Finance Bill, when we tabled an amendment calling on the Government to review the impact of this scheme on tax avoidance activity. That helpful amendment was not accepted by the Government, but I hope that this year—knowing that the Government profess to be keen to clamp down on all forms of tax avoidance—they will accept the need to have the right information available to prove that this policy will not create just another massive loophole.

Buried in the annexes to the OBR’s policy costing document from December 2012 was an admission that the cost of the scheme could rise to £1 billion by 2018—depending on take-up, obviously, and we are looking forward to the figures for that. A quarter of that cost was specifically attributed to tax avoidance—or tax planning, as it is termed in the report. In certifying the figures, the OBR stated that

“there are a number of uncertainties in this costing. The static cost is uncertain in part because of a lack of information about the current Capital Gains Tax arising from gains on shares through their employer. The behavioural element of the costing is also uncertain for two reasons. First, it is difficult to estimate how quickly the relief will be taken up; this could make a significant difference as the cost is expected to rise towards £1 billion beyond the end of the forecast horizon. Second, it is hard to predict how quickly the increased scope for tax planning will be exploited; again this could be quantitatively significant as a quarter of the costing already arises from tax planning.”

Perhaps the director of the Institute for Fiscal Studies, Paul Johnson, characterised the issue best when he wrote, in a Financial Times article aptly entitled, “Shares for rights will foster tax avoidance”:

“There may be a case for more flexible approaches to employment legislation. But as a tax policy, ‘shares for rights’ always looks pretty questionable. At a time of increasing scrutiny of tax avoidance schemes, it has all the hallmarks of another avoidance opportunity. So, just as concern over tax avoidance is at its highest in living memory, just as government ministers are falling over themselves to condemn such behaviour, the same government is trumpeting a new tax policy that looks like it will foster a whole new avoidance industry. Its own fiscal watchdog seems to suggest that the policy could cost a staggering £1bn a year, and that a large portion of that could arise from ‘tax planning’.”

It is bad enough that the policy is unnecessary, divisive, damaging and counter-productive. Those of us on the Opposition Benches pretty much all agree on that, and I have not heard any voices from the Government Benches argue the opposite. I look forward to the Minister’s contribution, once he has managed to find that article that is, apparently, supportive of the scheme. The fact that the scheme could cost the Exchequer up to £1 billion, and that one quarter of that cost could arise from tax avoidance, simply beggars belief. The Minister has previously stated that there are sufficient anti-avoidance provisions to mitigate such activities, but what are the Government actually doing to monitor capital gains receipts and reliefs, and ensure we have evidence of avoidance?

Recent reports from the National Audit Office and the Public Accounts Committee have been highly critical of the Government’s continued creation of complexities and loopholes that open the door to more tax avoidance. If Ministers fail to monitor such avoidance activity properly, I fear that this will be just one more tax relief to add to the 948 on the NAO’s list of unmonitored tax expenditures, to use the Treasury’s own phraseology. Considering that the scheme came into being last September, can the Minister produce any more up-to-date estimates, based on Treasury data, to build on the OBR’s original forecast? If he is not able to do that today, hon. Members will want to vote for new clause 11 to ensure that that information is available to the House, that monitoring is taking place and that we can all see the potential implications of the Government proposal.

The Chancellor’s flagship shares for rights scheme has been rejected by businesses. It may have opened up a tax loophole that, according to the OBR, will cost the Exchequer £1 billion. For what gain? That is what people are asking. That is what the Government need to demonstrate in their response today, or certainly in the report that we are calling for. We have said that we will reverse the shares for rights scheme and use the money to contribute to the repeal of the bedroom tax. The bedroom tax is a cost-inefficient policy and we would like to see it reversed. We want the money saved from the damaging shares for rights scheme to be used to ensure that that can be achieved without any extra borrowing. We have urged the Government to abandon their ill-thought-through shares for rights policy, which the director of the IFS aptly described as having all the hallmarks of another tax avoidance opportunity, never mind the former Conservative employment Minister, Lord Forsyth, accusing it of having the trappings of something thought up in the bath. So far, Ministers have failed to listen; or at least, they may be listening but they are not hearing.

We have tabled new clause 11 to try to provide much-needed clarity. Officials and Ministers dismiss out of hand as unrepresentative take-up figures disclosed in FOI requests. OBR forecasts are dismissed as not taking account of all the facts. Indeed, the Government’s own measures are dismissed as being unreliable or uncertain. Why will Ministers not step up to the mark and disclose exactly how many employees have signed up to employee shareholder contracts and have been awarded the £2,000 in return for shares? Why will Ministers not disclose the value of shares that have been issued under the shares for rights scheme to date? Instead of labelling Opposition amendments as unnecessary and as an administrative burden, which I anticipate the Minister will, why will the Minister not instead today tell us exactly how much the scheme is costing the Exchequer as a result of the capital gains tax exemptions? How much of that cost is as a result of tax planning arrangements; people capitalising on a poorly thought through policy that could quite easily act as a tax avoidance mechanism, rather than the great stimulus to entrepreneurship and employment that the Government claimed it would achieve?

It is bad enough that this divisive policy totally undermines the concept of employee ownership and workplace rights, not to mention the potential millions lost in tax avoidance activity; but worst of all, Ministers are plainly refusing to disclose the information that would enable Members properly to assess and scrutinise what the scheme has done to achieve the Chancellor’s clearly stated aim of helping businesses to recruit more people.

For all those reasons and given the concerns set out by my hon. Friends, I urge hon. Members to support our new clause 11, so that we can get the facts straight on shares for rights.

[Chris Evans (Islwyn) (Lab/Co-op)]

Before the soothsayers and the sketch writers say again that Labour is anti-something or other, I want to make something quite clear. [Interruption.] The sketch writer is in the Gallery, although perhaps I am being a little arrogant to think that anyone would want to report on one of my speeches. Before the press releases go out from Tory central office saying that Labour is anti-share save schemes all of a sudden, I want to make it clear that this party has always been in favour of shares to reward people for the work they do.

The best and most successful companies offer shares to their most successful employees. Indeed, I would like to draw the Minister’s attention to how successful a share save scheme can be by using the example—a Welsh example—of Admiral Insurance. In March 2013, it recorded a 15% increase in profits. In all, 6,500 members of staff at the Cardiff-based Admiral Group will get £3,000 in an employee share save scheme. Alastair Lyons, the chair, said at the time:

“I want to thank everyone who has helped us to create such a robust business”

in the past 20 years. People are more productive, happier and more contented when they are valued and, above all, when they feel valued. That is why the Admiral Group of companies are among the top 100 best places in the UK to work, which I am sure did not come about by trading in employee rights for shares.

Sometimes it seems that this Government are so intent on presenting some sort of radical, compassionate conservatism that they fumble around for an idea, before coming back to ideas that have failed time and again. Very often, it seems that this Government, like previous Tory-led Administrations, are fearful of employment rights, and I am not the only one saying that. According to even the independent Office for Budget Responsibility—if I may digress, Madam Deputy Speaker, the Government are resisting requiring that very body to audit all parties’ manifestos at the next general election—the flagship shares for rights scheme has been rejected by businesses, opened up a tax loophole and will lead to £1 billion being lost by the Exchequer. In the face of such criticism, it seems eminently sensible to support our amendment for it would compel the Treasury to report on the take-up of shares for rights, collect data on the scheme and publish further reports on shares for rights every year.

[James Duddridge]

Is there not a contradiction between the argument that the scheme will lose billions and saying that it is being taken up by nobody?

[Chris Evans]

I have the utmost respect for the hon. Gentleman, but he should allow me to develop the argument a bit further. As he knows very well, this is a Finance Bill, and the Opposition cannot move any amendments that relate to spending. A report is the only thing we can propose, and it would be eminently sensible. If we had the data, we would know what the uptake was. I would argue that the Government have to abandon their ill thought out “shares for rights” policy, which even the director of the Institute for Fiscal Studies described as having

“all the hallmarks of another avoidance opportunity”.

My hon. Friend the Member for Newcastle upon Tyne North (Catherine McKinnell) alluded to the Conservative employment Minister Lord Forsyth who described it as having

“the trappings of something that was thought up in the bath”—

by the Government on their own, I hope, although we don’t know with Tory sleaze! It is bad enough that this divisive policy undermines the concept of employee ownership and workers’ rights, but it could also cost the Exchequer up to £1 billion, a quarter of that arising from tax planning activity—the very tax planning activity that the Chancellor said he had clamped down on since he took office.

Fundamentally, the problem that employees have faced over the last 40 years with the end of heavy industry—it is a problem that comes with Governments of all stripes—is that most feel insecure in their jobs anyway. People do not have a job for life any more; they move around seven or eight types of jobs, but slashing employment rights at work is wrong in principle. It will not help create jobs and growth. It seems to me that this is a policy made up on the fly.

If anybody wants to know how ill-conceived this policy is, they need only look at some statistics. The scheme has not won the support of the business community. A 33-week consultation on the scheme—two thirds of the year, or nine months—had more than 200 responses. Of those, only five businesses said they would be interested in taking up the scheme.

I sometimes think I admire the Chancellor. He is an economist—of the highest rank, I have no doubt—but I wish he were here to explain how he came up with the line:

“Owners, workers and the taxman are all in it together”.

Where was the sense in that? It is just not fully worked out. Has he not asked the employer? If an employer has a bad employee, why would he want to give them shares and make them owners of the company? That does not make sense to me. The employee would then have voting rights over what the employer wanted to do. Why would an employee want shares in a company that had just dismissed him? It should be easier to hire than fire.

We need tax breaks for small businesses so that they can hire extra employees rather than throw away their employment rights. As a proud Labour and Co-op MP, I support employee ownership, but coupling it with slashing employment rights is contradictory and counter-productive. As the Employee Ownership Association has pointed out, boosting employee ownership

“does not require a dilution of rights”.

Even a city on the hill, the United States of America, where employee rights are certainly not in fashion, has criticised the scheme. The proposal reflects the “fire at will” recommendations of the controversial Beecroft report, authored by the Prime Minister’s employment tsar and Tory donor, Adrian Beecroft. Mr Beecroft admitted to MPs that his proposals were based not on any statistical or empirical evidence but on a “valid sample of people”. Who has he spoken to? No doubt the same Tories who have problems with the employment rights of anybody anywhere.

The scheme could also present considerable costs to business and create new administrative burdens. I believe that people are already being deterred from taking up the scheme. Alan Higham told The Guardian:

“I worry it would create suspicion among employees that I might sack them unfairly. Employees wouldn’t easily be able to see the value in the shares today…If I employ 10 staff and decided to give them £2,000 each of shares, then I would need to spend £10,000 in getting a professional valuation done. Under current tax rules I would also have paid them £2,000 each to change their contract, on which PAYE and national insurance would be charged. As this is a gift I would also have to pay tax on this. On this basis it could cost me £10,000 and a further £9,400 to give away £20,000 of shares. There will probably also be some sort of ongoing admin and HMRC compliance to do, which will also cost.”

Fundamental questions must be asked about this entire scheme. If the company goes bankrupt—if the employer is so bad that he runs his company into the ground—does the employee he has just sacked become responsible for any of the company’s losses? If the employee has shares in the company, of course he will.

Ministers are seeking to introduce this scheme without proper consultation and discussion. They have proceeded in a shambolic and chaotic way. That is reflected by the fact that the Second Reading of the Bill that became the Growth and Infrastructure Act 2013 took place before the consultation had closed.

Given that £10,600 of capital gains tax is already exempt, exemption from CGT in the scheme is only likely to benefit employee shareholders in a small minority of companies which achieve unusually high growth. There is also concern about the full cost of the scheme. Ministers originally claimed that it would be £100 in 2017-18, but according to the Office for Budget Responsibility’s contribution to the Treasury’s policy costing document, which was released along with the 2012 autumn statement 2012,

“the cost is expected to rise towards £1 billion”,

and the OBR concluded that

“uncertainties are around assumptions on take up rates, the average value of shares that are entered into the scheme, the extent of tax planning and the timing of disposals.”

What really concerns me is that a person could throw away all his employment rights in return for shares that could already be tumbling. There is no win-win situation for such people.

According to the Office for Budget Responsibility, a quarter of that £1 billion additional cost—£250 million—is expected to arise from tax avoidance as a result of the scheme. A Government who have been obsessive about tax avoidance seem to be creating another vehicle for people to avoid taxation. Following the publication of the Government’s response to the consultation scheme, a Government source was quoted as saying:

“The proposals are on life support.”

However, Ministers went ahead with them. I wonder whether this Minister knows who that person was, and whether he can enlighten us.

It seems to me that the scheme is unworkable. When “shares for rights” were discussed during the Committee stage of the Growth and Infrastructure Bill, the Minister of State, Department for Business, Innovation and Skills, the right hon. Member for Sevenoaks (Michael Fallon), admitted that employees taking part in the scheme could be liable to pay income tax and national insurance on any shares received from employers over and above £2,000. That would impose a significant up-front cost on employees.

It is feared that there are other ways in which the scheme could have an adverse impact on employees. For example, will jobs be advertised as available only with employee shareholder status? In practice, will employers be able to impose the scheme on individual employees or groups of employees? What safeguards will there be to ensure that the scheme is voluntary for existing employees, as Ministers claim that it will be?

On behalf of the members of the Employee Ownership Association, chief executive lain Hasdell sent an open letter to the Under-Secretary of State for Business, Innovation and Skills, the hon. Member for East Dunbartonshire (Jo Swinson), who is responsible for employment relations, consumer and postal affairs, expressing concern about recent developments in the Government’s approach to growing the number of employee owners in the economy. He said:

“'Our Members have three main concerns on this matter.

Firstly, proposed legislation has appeared in a Bill before the Government consultation on the possibility of deploying this model of employee ownership has finished. Indeed it has only just started.

Secondly, our Members are very aware that there is no need to reduce the rights of workers in order to grow employee ownership and no data to suggest that doing so would significantly boost the number of employee owners. Indeed all of the evidence is that employee ownership in the UK is growing and the businesses concerned thriving, because they enhance not dilute the working conditions and entitlements of employee owners.”

In that context, I remind the House of what I said about Admiral Insurance in Cardiff at the beginning of my speech. Iain Hasdell continued:

“Thirdly, the appearance of this measure in the Growth and Infrastructure Bill appears to our Members to be completely disconnected to the recommendations in the Nuttall Review. That Review contained a series of recommendations on how to grow employee ownership and none of those recommendations suggested the dilution of worker rights.”

I am not the only person who is saying these things, and that is why I believe that we should have a report. The criticism of this measure has been immense, from the business community and employment organisations to trade unions—some Members on the Government Benches will probably think I have sworn there. The Employee Ownership Association says:

“whilst growing employee ownership should be part of the UK’s Industrial Policy, such growth does not require a dilution of the rights and working conditions of employees.”

Brendan Barber, TUC general secretary, said:

“We deplore any attack on maternity provision or protection against unfair dismissal, but these complex proposals do not look as if they will have very much impact, as few small businesses will want to tie themselves up in the tangle of red tape necessary to trigger these exemptions.”

There, in a nutshell, is the problem: there is low take-up; it is very complicated; people are not interested. As my hon. Friend the Member for Newcastle upon Tyne North said, we see maternity provision, a hard-fought right that many people argued and fought for and in some cases gave their lives for, being given up for the whim of a few shares in a company that could be either taken over or finished in a couple of years.

Mike Emmett, employee relations adviser at the Chartered Institute of Personnel and Development, says:

“The UK has one of the least regulated labour markets in the world and there is little evidence to suggest that employment regulation is preventing small businesses from taking people on. In fact, according to the Government’s own research, unfair dismissal doesn’t even figure in the list of top ten regulations discouraging them from recruiting staff. Employees have little to gain by substituting their fundamental rights for uncertain financial gain and employers have little to gain by creating a two tier labour market.”

[Geraint Davies (Swansea West) (Lab/Co-op)]

My hon. Friend is making a very eloquent and provocative speech. Does he agree with me that it is intrinsically wrong for someone to sell their rights, just as it would be intrinsically wrong of me to sell myself into slavery? Is this not going down that absurd and immoral path?

[Chris Evans]

I do not know how much my hon. Friend thinks he would get if he sold himself into slavery—[Interruption.]

[Mr Speaker]

Order. Thankfully, that matter would be out of order to discuss. Therefore, any embarrassment that the hon. Member for Swansea West (Geraint Davies) might feel is spared.

[Chris Evans]

Thank you for that interjection, Mr Speaker, and I am sorry that I treated such a serious topic as slavery in a light-hearted manner.

I agree with my hon. Friend: these are hard-fought employment rights. I do not want to hark back to the past, but although the Conservatives like to say theirs is a progressive party, every piece of social legislation in this country, from votes for women to increased maternity and paternity rights to the minimum wage and even the state pension, has been brought about by Labour and by people having to fight for them. To me, it seems frivolous for those rights to be given away. As a former trade union official working in financial services, I do not believe that people were deterred from employing staff because of the rights they had. Maternity rights are accepted across the board. If someone goes on maternity leave, people believe they have that right, and it is shocking that the Government think this can be sold off for 30 pieces of silver.

John Cridland, director general of the CBI, said:

“I think this is a niche idea and not relevant to all businesses,”

again backing up my argument that this is policy made on the fly. It has not been thought out. It seems to me that the share schemes and share save schemes work very well without people having to trade their employment rights. Employers who have introduced a share save scheme or given shares to their employees do so as a reward for good business practices, not to buy off potentially bad employees.

There is a little thing that we should learn in this House: it is called trust. If an employer asks me to sell my rights, I will straight away be suspicious; I will always work hard, but I will not be industrious in the way I should, and I am going to ask myself questions such as, “Is there a question mark over my competence if he is willing to trade my hard-fought employment rights for shares in his company?”

[Stephen Lloyd (Eastbourne) (LD)]

I have sympathy with some of the Labour party’s concerns on this issue, but having listened for an hour or so one thing occurs to me. Does the hon. Gentleman agree that no employee will be forced to do this—they will voluntarily choose to do so or not? That is important.

[Chris Evans]

The hon. Gentleman is taking a very liberal position, but I refer again to the evidence given during the Committee stage of the Bill that became the Growth and Infrastructure Act 2013, which introduced the measure. It was said there that employees who took up the scheme would have to pay income tax and national insurance on any share received from employers over and above £2,000. The scheme would impose significant up-front costs, so I do not know whether it would be so voluntary. I have criticised Adrian Beecroft about his anecdotal evidence, but I wonder what would really happen in the workplace. We know of so many tribunal cases where people have been harassed or been under severe strain from an employer and then gone on long-term sick leave. What is to prevent the employer from forcing them to sell those rights?

[Catherine McKinnell]

My hon. Friend raises an important point, but the intervention by the hon. Member for Eastbourne (Stephen Lloyd) does not take account of the fact that many employees are in a very vulnerable position with their employers. If they are approached by their employer to take this up and they turn it down, what happens? What situation are they left in? There are an awful lot of question marks over how the scheme works in practice and where the equality of arms is for the employees potentially affected by the scheme.

[Chris Evans]

My hon. Friend advances the argument eloquently. We debate these issues and talk about employment rights, but if someone is in a poor workplace, is struggling to pay the rent or the mortgage and the bills, and faces a severe threat that they might lose their job, they might be forced into doing this. In many non-unionised businesses there will be nobody to police this, so those people might be forced into it. She powerfully made the point about how women, in particular, are in that type of situation.

I should have made my next point before the hon. Member for Eastbourne (Stephen Lloyd) intervened on me, but I will do so now. Paul Callaghan, partner in the employment team at Taylor Wessing, has said:

“Osborne is potentially forcing all new employees to waive the main employment rights including unfair dismissal and redundancy rights in exchange for £2,000 of shares. This makes Adrian Beecroft’s fire at will proposals look moderate.

From April it may become the norm for job offers to require this waiver which will also involve the loss of flexible working rights and stricter maternity rights. This is likely to have a disproportionate effect on women.”

Henry Stewart, founder and chief executive of the training company Happy Ltd, has said:

“I welcome anything which makes it cheaper and simpler to give employees shares, but coupling it with taking away employment rights is ridiculous. If as an employer you have a problem with unfair dismissals, you need to improve management—that’s what the government should be giving incentives for. I don't think it's been thought through.”

In a nutshell that sums up what I think of this proposal. Bad employers who are afraid of unfair dismissal cases, reprisals, recrimination and grievances from employees should think about how they are managing their staff and look hard at their human resources department.

Corey Rosen, founder of the National Centre for Employee Ownership, one of the world’s leading groups promoting share ownership, has said:

“There is a lot of employee ownership in our country, but not one of these employees and not one of these plans asks employees to give up any employment rights to get any of the various tax benefits associated with employee ownership.”

That is a voice from the United States, not somewhere known for being particularly friendly to those in trade unions or on employment rights.

Simon Caulkin, writer on management and business, has said:

“In effect, Osborne's cobbled-together scheme is a back-door re-run of the agenda of…Beecroft”.

Rebecca Briam, partner at Gannons Solicitors, said:

“It is unlikely to get off the ground.”

With only five businesses out of 200 wanting to take up the scheme, I think she is right. She goes on to say:

“The proposals will be unpopular with employees because the chances of benefitting are so slim.”

She said that it was

“unpopular with employers, especially privately controlled companies, because of the risks imposed to the share structure. Far from saving on payroll expenses, the total costs for an employer may well increase.”

Manufacturers’ organisation EEF said:

“Our members have indicated they would not implement the new status.”

The Federation of Small Businesses said:

“The scheme is unlikely to be appropriate for many small businesses.”

The Chartered Institute of Personnel and Development said:

“There is very little evidence as to why this policy is needed or what impact it will have.”

Such views support the new clause that is before us.

Earlier, I talked about the vehicles that are created for the purpose of tax avoidance. Matthew Findley, partner at law firm Pinsent Masons, addressed that matter quite eloquently. He noted that the income tax positions of those receiving the shares is still unclear:

“There is nothing in what the Government has said so far that would stop senior executives or substantial shareholders from participating in the arrangement. This may mean that an opportunity still exists for such individuals, even if they may be viewed by some as the ‘wrong’ people politically to benefit.”

Paul Johnson from the Institute for Fiscal Studies talked about the potential for tax avoidance as the scheme

“prepares to put another billion pound lollipop on the table.”

He says:

“Just as Government Ministers are falling over themselves to condemn such behaviour, that same Government is trumpeting a new tax policy which looks like it will foster a whole new avoidance industry.”

An avoidance industry is something of which a Government who want to create jobs cannot be proud.

I support new clause 11. As there has been such a low take-up of the scheme—only five in 200 companies have said that they would consider it—a report needs to be produced. Numerous commentators from the business community have expressed the fear that a new tax avoidance scheme is being set up, which suggests that this is a pertinent and sensible new clause, and I urge the Government to accept it.

[Richard Fuller]

I am pleased to follow the hon. Member for Islwyn (Chris Evans), who spoke with great authority, drawing as he did on his experiences as a trade union official before he was a Member of Parliament. I will, if I may, draw on some of my own experiences of working with small businesses. In that regard, I draw Members’ attention to my entry in the Register of Members’ Interests.

I apologise to the hon. Member for Newcastle upon Tyne North (Catherine McKinnell) for missing the beginning of her comments. I thought that she spoke persuasively and eloquently about some of the issues and about the policy that the Government have introduced. She had me persuaded all the way, until she referred to the spare room subsidy as a tax. It is just not a tax, and it is such a shame when bad slogans happen to good people because all the persuasion power of their speeches is lost. The rest of her speech raised some important points.

We should put the new clause into context. The Government have an extraordinary long-term economic plan that is delivering improvements to the economic lives of my constituents in Bedford and Kempston. It impacts on their ability to find work and get into work. It also raises their average weekly earnings, which is a major concern for many people. It is good to see the plan starting to bear fruit.

Perhaps now is not a good time for an ordinary Tory Back-Bench Member to criticise the Government, but if my hon. Friend the Minister will forgive me, I will do so. We are looking here at a policy in search of a problem; we are not really looking at something that will have a dramatic impact on the well-being of our businesses or our employees. I am open to being persuaded by the Minister. He usually persuades me and I am sure that he will do so today, but perhaps I could go through some of my experiences from when I was in business relating to two parts of our debate.

On the one hand, we have employee and workers’ rights and, on the other, we have employee shareholdings. The approach seems to be to conflate those two issues into one policy and I am not sure whether that will ultimately prove to be wise. In my experience as an employer, although employees’ issues in employment sometimes concerned the extent of employee rights, red tape and regulation often led to far more concerns about the impact of government on the business. In addition, the problem was not necessarily the rights per se but the complexity of the regulations. For a small business, just understanding the regulations to comply with them causes problems. I am not sure that the problem was specifically the rights that were given to employees. Is the objective in this case to reduce the complexity of regulation for businesses through the use of the combination of employee shareholdings, or is there some other objective?

The hon. Member for Islwyn mentioned some of the issues when companies give shares to employees. For a large part of my life, I have worked with technology businesses and the provision of shares was a norm for business. It was a way in which many companies could afford to start, to grow and to prosper. In those circumstances, people were given shares not because of their employee rights but as an incentive either to reward effort or to encourage effort to promote the success of the company. It was also a matter of the trade-off of rewards. Many small companies did not want to use the cash they got from investors to pay high or market rates to their employees and wished to defer that by providing people with the opportunity to have shares to share in the ultimate long-term success of the business. That is a tremendously powerful model for many sectors, not just the technology sector but other sectors of our economy, in that people are willing to trade off immediate returns for long-term rewards.

When we consider other ways to think about compensation, which will, I think, be a growing issue over the next five years, we must consider how to encourage people to defer some of their compensation until later in their lives. I can understand how the promotion of employee shareholding helps with short and long-term rewards, but my concern is that combining that with employee rights means that clarity might be lost. Rather than being given a positive impression about why we are encouraging employees to become shareholders, people will instead ask whether there is a catch. It should be absolutely clear that there is no catch when people are being offered shares. This is clearly an issue of deferring compensation from period x to period y.

I am concerned that, as I have said, this is perhaps a policy in search of a problem. As with so much that Government do, we will see unintended consequences. If the new clause is targeted at small businesses, we must remember that the Government have other options at their disposal. Just a week or two ago, the Centre for Policy Studies produced some very positive policies about abolishing corporation tax for very small businesses and abolishing capital gains tax for investors. To my mind, that would have more of an impact on encouraging more entrepreneurial businesses. We have recently seen news about the merger of national insurance and income tax, which would alleviate some of the burdens and complexity for business in managing employees.

--- Later in debate ---

[Mike Kane]

It is a delight to follow the hon. Member for Bedford (Richard Fuller), who spoke with such authority about his work now and previously with small businesses. It was a pleasure to serve with him on the Finance Bill Committee, where generally he spoke loyally from the Government Benches on his party’s agenda, even though he disagrees slightly with the policy before the House now. It is also a pleasure to follow my hon. Friend the Member for Islwyn (Chris Evans), who spoke articulately and ably, using his experience as a former trade union official.

I believe that shares for rights as it has been proposed lacks common human dignity. We know that the main purpose of Government is to protect individuals, communities and their property from exploitation and harm; Government must also provide a stable economic, social and legal framework for businesses and economies to thrive. The proposal does not do that. As I mentioned earlier, Lord O’Donnell described shares for rights as a form of modern-day slavery. It creates a two-tier market and a two-tier work force—one part having sold its rights and the other retaining them. I think that that is wrong for our economy.

The policy was announced with great fanfare in 2013, but the shares for rights scheme cannot be described as anything other than a massive flop. It is also proving to be another bone of contention in our fractured coalition. The Under-Secretary of State for Business, Innovation and Skills, the hon. Member for East Dunbartonshire (Jo Swinson), and the Secretary of State are nowhere to be seen near the proposal. The real problem, though, as the Chancellor has found, is that it has been impossible to get employer organisations to back the scheme. As my hon. Friend the Member for Newcastle upon Tyne North (Catherine McKinnell) said, according to the most recent information we have—hopefully, the Minister will update us—there were 19 expressions of interest by December last year. The Office for Budget Responsibility says it could be used as a tax dodge, costing us—the Treasury—nearly £1 billion a year. In this age of austerity, that is the last type of policy we need to be introducing.

Ministers seek to introduce the scheme without proper discussion, and without proper consultation, as my hon. Friend the Member for Islwyn said, and have proceeded in what can only be described as a very chaotic way. Following the publication of the details of the scheme, a Government source was quoted as saying that the scheme was on “life support”, but Ministers still went ahead. As was mentioned earlier, John Cridland, director-general of the CBI, said that this was a niche idea that businesses really do not want. There is unanimity among people who really care about employers and their rights and those Opposition Members who believe that employees should also be shareholders and work hard in their small and medium-sized enterprises, where most employees now reside.

[Chris Evans]

Does my hon. Friend think it is just a coincidence that the vast majority of the FTSE 100 companies also find themselves in the list of the top 100 best places to work in the UK, and they have not rolled back employment rights in any way and have successful share save schemes, as I mentioned earlier?

National Insurance Contributions Bill

Chris Evans Excerpts

Monday 4th November 2013 Commons Chamber

[Christopher Pincher (Tamworth) (Con)]

While the Labour Whips hunt for a seventh dwarf—

[Chris Evans (Islwyn) (Lab/Co-op)]

Cheeky!

[Christopher Pincher]

No, I am definitely Bashful. Cheeky is probably on the other side of the House.

Does my hon. Friend the Minister agree that the key component—the most important innovation in the proposal—is the fact that it encourages confidence among businesses, particularly small businesses? I held a jobs fair a couple of weeks ago and 500 jobs, part-time and full-time, were available. Many small businesses at the fair thought that cutting their tax through this measure was the right thing to do.

Protecting Older People from Fraud (Wales)

Chris Evans Excerpts

Tuesday 15th October 2013 Westminster Hall

[Paul Murphy (Torfaen) (Lab)]

I am glad to be serving under your Celtic chairmanship, Mr Weir. I am sure that you understand that some of the issues in today’s debate are very much relevant to the whole of the United Kingdom. I am also grateful to the Minister, whom we look forward to hearing from later.

A few statistics will show the extent of scams just in Wales, and how they affect all of us who represent Welsh constituencies. Between February 2012 and February 2013, 2,500 scams were reported, but it is reckoned that only 5% of scams that occur are reported to the authorities, so the total number could be as high as 50,000. There were 958 doorstep complaints, with 19 prosecutions, and 1,658 post, e-mail and telephone scams, with only two prosecutions. Those figures are revealing, not least because the majority of the victims of those scams were probably people, such as myself, over the age of 60. Those who are affected by such crooks and gangsters, who prey on our old people, are, I fear, vulnerable, physically and mentally. On average, older people lose £1,200 per person when swindled, although they can lose an awful lot more—their dignity, their self-esteem and, tragically and occasionally, their very will to live.

Recent examples of scams in Wales include one that involved the distinguished correspondent for BBC Wales, David Cornock. His elderly mother was swindled out of £270,000 by fraudsters, eventually leading to her premature death. In addition, a man in my constituency sent money to a non-existent lottery, the so-called European Lottery Guild, while a woman in Wales sent nearly all her money to a clairvoyant in Switzerland. Those examples are only the tip of the iceberg, which is why Age Cymru—a fine organisation—is now campaigning on the issue, led by Gerry Keighley, who used to be the editor of my local evening paper, the South Wales Argus. They are all doing a great job.

[Chris Evans (Islwyn) (Lab/Co-op)]

The Bryn estate in Pontllanfraith in my constituency has been plagued by doorstep scammers, rogue traders and their ilk for a number of years. Thanks to the Bryn residents’ association, a “no cold calling” zone has been introduced, which has had a huge and beneficial effect. Does my right hon. Friend agree that such schemes require further sight by the Government and endorsement throughout the country?

[Paul Murphy]

Indeed I do, and I shall come on to that matter in one of my recommendations to the Minister. My hon. Friend makes an interesting point, however, about the role of neighbours. When someone is aware that an older person or couple, vulnerable as they are, lives nearby, neighbours, as well as friends and family, have a huge role to play in deterring such terrible things, as do citizens advice bureaux and our local authorities’ trading standards departments, all of which are aware of the issues.

I want to bring to the attention of Members a new sharp practice—that is what I shall call it at this stage—resulting from the so-called green companies exploiting the Government’s affordable warmth scheme and the green deal. Those schemes are, in themselves, good; they seek to give vulnerable people, such as those on benefits or who are older, help towards reducing their energy bills, whether through insulation or whatever. I am in no way criticising such excellent schemes, which are funded by the United Kingdom Government, not the Welsh Government, although of course they operate in Wales as well as throughout the rest of the United Kingdom.

Such phone-in companies call older people and try to persuade them to register for advice and assistance, for which they are charged. In reality, those who wish to take advantage of the Government schemes can simply go to the authorities, official help lines, citizens advice bureaux or trading standards departments and ask for advice on what they should do. As everyone in the Chamber knows, however, people are often caught by a person calling on the telephone, and they are susceptible and more vulnerable to such activity.

Co-operatives

Chris Evans Excerpts

Wednesday 3rd July 2013 Westminster Hall

[Mr Philip Hollobone (in the Chair)]

I have a wealth of talent before me to debate the effect of co-operatives on the economy, and I call Chris Evans.

[Chris Evans (Islwyn) (Lab/Co-op)]

Thank you, Mr Hollobone; you are too kind. It is a pleasure to serve under your chairmanship once again.

It gives me great pleasure to have secured the debate right in the middle of co-operatives fortnight. I am a proud member of the Co-operative party and take great pride in sitting as a Co-operative Member of Parliament. The Westminster group of Co-operative MPs is the largest that it has been for 95 years. I am pleased to work alongside colleagues in the Scottish Parliament and the National Assembly for Wales, together with thousands of councillors around the country.

The purpose of this year’s co-operatives fortnight campaign is to focus on helping people to find co-operatives they love, whether they are providing sparkling wines or energy, and whether they are online or in-store. The campaign also gives Members from all parties in the House an opportunity to learn more about what is happening co-operatively in their constituencies.

Co-operation runs through the fabric of the south Wales valleys, where I was born and brought up, and which I am proud to call home. Indeed, family legend states that the last words of my great-grandmother, before she passed away at the age of 104, were, “It’s okay; I’m with the Co-op.” From Tower colliery in Cynon Valley to local corner shops, co-operatives permeate every strand of our society.

The debate affords me the opportunity to speak about the Islwyn community credit union, which offers saving accounts and small loans to members who, after a few months, become eligible for a loan at low interest rates. The great thing about the credit union is that its methods are working. In the past few days, the coalition has announced its intention to crack down on payday lenders. I am pleased that it is credit unions such as the Islwyn community credit union that have been at the forefront of the fight to turn households away from doorstep lenders and payday loan companies, which for too long have had a stranglehold on the type of valley community that I represent.

I feel extremely privileged to have been able to share a number of milestones with the Islwyn community credit union, most notably when it celebrated lending £1 million to families across my constituency of Islwyn. The credit union is an example of the impact that co-operative organisations can have on a local economy, which is why I am pleased that the co-operative sector has outperformed the rest of the UK economy since the financial crisis began.

With every pound spent in a co-operative generating an additional 40p for the local economy, the success of co-operatives can only be a good thing for the communities that we represent. Co-operatives are popping up all over the country, even in areas that do not have the history of co-operatives enjoyed by areas such as mine in the south Wales valleys. Since 2008, the UK co-operative sector has grown by more than 20%, and co-operative businesses in the UK now have a turnover of more than £36 billion a year.

As other industries and sectors feel the impact of the recession and the economic crisis, the number of co-operatives has increased in each of the past five years. There are now 6,169 co-operatives nationwide, 446 of which are based in Wales. Last year alone, the number of co-operatives throughout the country increased by 236, which was a rise of 4%. Membership of co-operatives is also growing month by month and now stands at more than 15 million, which is a 36% increase in membership since 2008.

The co-operative sector has also diversified over the past five years. More and more people understand that co-operatives are not just supermarkets or—as my great-grandmother understood—providers of funeral services. They also operate in other parts of the economy, from health care to housing, from farms to football clubs, and from credit unions to community-owned shops.

While preparing for the debate, I read about the increase in community-run shops. With more and more commercial shops struggling in the recession, communities are coming together to preserve stores that offer valuable services to a town or village, such as a local bakery. Food stores that can no longer cope with high rents or costs and therefore have to leave the local high street are being replaced not by new commercial businesses buying vacant units on the high street, but by local people who know at first hand how valuable local stores are to the communities in which they live. Some 6% of commercial village shops are being taken on by groups of residents who are determined to ensure that shop closures do not leave a gap in their community. These stores are not only having an effect on local life, but making a significant contribution to the UK economy.

The Co-operative Group has a work force of almost 100,000 people, which makes it one of the largest private employers in the UK. In 2012, community shops had a combined turnover of £49 million and more than 50,000 people were involved in some way in a community-run enterprise. The Plunkett Foundation reports that there are more volunteers working across co-operative community shops in the UK than there are helping national charities. Such co-ops are having a long-term impact on the economy; they are not a short-term fix to keep a store open temporarily before a commercial company can come in and take it over. Research by the Co-operative Group indicates that while only 65% of conventional businesses survive for their first three years, more than 90% of co-ops are still in business after their first three years. Those co-ops are local enterprises that create jobs and employ people on local high streets. In turn, those people are walking up the same high street and spending their wages in local shops. Co-ops and their staff are putting money straight back into the economy and the small businesses that make up our communities.

I was especially interested to read the results of a recent YouGov poll that asked people for their thoughts on co-operative businesses. Some 52% of respondents described co-operative organisations as “trusted”, compared with a figure of just 7% for plcs. We see that though the work done by societies all around the country. The top three words that came to people’s minds when they were asked their views on co-operatives were “fair”, “democratic” and “trusted”. That tells me that, unlike almost every other profession and institution in the UK, co-operatives still have one thing that the rest do not seem to have: that simple word “trust”.

Every Member will have felt the distrust that the public have developed for politicians, but we all know that it does not stop there. The police, journalists and bank managers—all good professions—have been damaged in the past decade, and the trust that people once had in them has all but gone. When I hear about community-run co-operatives, it says to me that they can fill the gap. Quite simply, people have to trust something, and if they do not trust businesses, banks or whatever, they can trust local co-operative organisations. In society, even outside co-operatives, it is important that people have trust, because without trust, people cannot believe in anything, and that brings about anarchy. However, if trust is still there for co-ops, it shows that they can fill the void so, quite simply, we have an opportunity.

I am saddened that the opportunity to promote co-operatives and mutuals as an alternative is not being exploited by the Government. I have spoken about the impact of co-operatives on the economy, but I am worried about how seriously the Government are taking them. We have a heard in the past few weeks from Government Members about the place of the Co-operative party in Westminster, but I know that a Conservative co-operative movement was recently established, and its members will appreciate some of the points that I am about to make.

Let us take the example of the Energy Bill. When the Secretary of State for Energy and Climate Change was appointed, we were promised a “community energy revolution”. My Labour and Co-operative colleagues on Labour’s shadow Energy and Climate Change team worked hard to make sure that he stuck to that commitment. Co-operative energy companies, such as the one created by the Midcounties co-operative, have an important role to play in the energy market. We all want to see large community projects such as the Westmill wind farm co-operative in Oxfordshire, but there will be less and less chance of such projects popping up across the country if the Government do not give co-operatives proper support.

I do not have to tell you, Mr Hollobone, that the energy industry faces a lot of challenges. There is widespread opposition to projects such as wind farms, which will become more and more of a reality in the coming years whether we like it or not. What frustrates me is that a lot of that opposition is completely unnecessary; it could be avoided if the Government further supported co-operatives and did not overlook them ahead of scrutiny in this place.

Research commissioned by the Co-operative party has shown that two thirds of people who would oppose wind turbines near their home would change their mind if the turbines belonged to the community. When people were surveyed on their perception of energy companies, the results showed that the public were 4.5 times more likely to “completely trust” a co-operative energy supplier than another energy supplier. This was what I was getting at when I spoke about trust: people instinctively trust co-operative projects. However, more has to be done if we want co-operatives to continue to stimulate the economy in sectors such as energy.

I have spoken numerous times in the House about housing, because we are facing a genuine housing crisis. There can be little doubt that investing in infrastructure is the way to stimulate and grow the economy, and the prime way of doing that is house building. If the Government are building new homes, it means that people are in work and that building firms can bid for contracts, and it also helps to bridge the gap that is starting to develop between supply and demand. I see that in my constituency surgery each week. When people affected by the bedroom tax ask me, “Where am I going to live? The council do not have any homes and I cannot stay where I am,” I am sorry to say that I do not have an answer for them.

The majority of social tenants in Caerphilly county borough council are in two or three-bedroom homes, and there are no one or two-bedroom homes for them to move into. In parts of my constituency such as Crumlin, 70% of tenants are thought to be in under-occupation. In Newbridge, the figure is 60%. Everyone in the borough knows that there are no homes to move into, but what choice does the council have but to implement the policy? These families are victims of legislation—that is why they are suffering—yet the Government still do not build homes. That frustrates me, because the Government could look to co-operative housing to fill the gap.

Throughout Europe, 10% of people are in housing co-operatives, but the figure for the UK is only 0.6%. In Sweden, co-operative housing tenure has existed since 1920 and nearly one fifth of all housing is provided in this way. In Poland, 3.5 million homes, which account for almost 30% of the total housing stock, are managed by a housing co-operative.

Co-op housing works in different ways in different countries, but the basic principle is no different from that of credit unions or community-owned shops. Such housing providers are jointly owned and democratically controlled by their members. Community co-operatives have rescued pubs and shops in the UK, but we do not seem to think of the impact that they could have on the housing market and, subsequently, our economy, so an opportunity is being missed. David Rodgers, the current president of the International Co-operative Alliance, said:

“Britain has stood still for two and a half years and has failed to recognise the contribution co-operative housing can make”.

Such opportunities are not receiving the support that they should get.

My hon. Friend the Member for Stalybridge and Hyde (Jonathan Reynolds) introduced the Co-operative Housing Tenure Bill last year, which would have had a real impact and improved the legislative framework for co-operative tenure. The Bill would have given people an alternative to owning and renting, but the Government did not support it. They like to talk about house building as a way of driving economic growth, and they went as far as explicitly saying in the coalition agreement:

“We will promote shared ownership schemes and help social tenants and others to own or part-own their home”.

However, it seems that co-operative housing is another area in which the Government talk a good game but fail to deliver.

In respect of financial mutuals, the Government could look at co-operative examples to help to stimulate the economy. After three years in this House, talking about the economy month after month, I have discovered a few things. First, it is fashionable to blame the bankers for everything. I admit that when I first came to the House, I was guilty of doing the same thing, like everybody else, even though I used to be one. Secondly, nobody seems to be coming up with any real alternatives to our financial system to avoid scandals such as Lehman Brothers in 2008 and more recently involving LIBOR.

It seems a while since the Prime Minister and Deputy Prime Minister stood together in the rose garden of No. 10, but it was only three years ago. Once again, the coalition offered high hopes to reform our banking sector, pledging to

“bring forward detailed proposals to foster diversity in financial services, promote mutuals and create a more competitive banking industry.”

Yet when the Government had an opportunity to put these words into action, what did we see? Absolutely nothing. If the coalition had been serious about promoting mutuals in our financial sector, they could have re-mutualised Northern Rock. Instead, the Treasury sold the bank to Virgin in a deal that the National Audit Office has subsequently suggested did not give the taxpayer good value for money. Co-operative colleagues tabled a raft of amendments to the Financial Services Bill earlier this year that would have forced the Government to make good on their pledge by introducing financial inclusion, education and transparency, but once again the amendments were chucked out and the Government ploughed on with the same old approach.

Last year, I tabled a private Member’s Bill, the Banking (Disclosure, Responsibility and Education) Bill. It is based on the Dodd-Frank Act in America, which enables every bank transaction to be monitored. My Bill would require banks to produce a report specifying who they are lending to, to find out about those excluded from financial products from mainstream banks.

When we talk about people excluded from financial products, we are not just talking about those without complex bank accounts. We are talking about the 9 million people without access to any credit whatsoever from banks. These households have serious difficulty getting access to essential services such as energy, water, land lines and the internet. A situation like that creates a breeding ground for loan sharks and high-interest lenders.

Where I grew up in the south Wales valleys, we lived on an L-shaped street. On Monday nights we would see a white car come over the top—an XR3i, for hon. Members who remember those souped-up cars. I can remember a woman getting out of the car, and all the doors were slammed shut. All the kids were pulled in from the street. It was the woman from the Provident. My mother claimed that she smelled of cheap Estée Lauder perfume. I do not know what Estée Lauder smells like, but my mother said it was cheap. That woman would knock on someone’s door and shout, “You owe me £400”. That was wrong, but everybody in our street thought that person owed £400. “I’ll get you next week, love”, she used to say.

I remember my mother panicking about whether we had enough money for the Provident. We would get our hands down behind the settees, looking for spare change to get it together to pay the woman, because we did not want her shouting down at us. We felt that climate of fear at 6pm every week, on a Monday. The saddest thing is that I know that is still going on, not just in communities like mine, but in communities throughout the country.

[Andy Sawford (Corby) (Lab/Co-op)]

My hon. Friend rightly hits on one key benefit of co-operatives, which is their values. He also reminds me of my own childhood. I remember that Sid, who ran the Co-op at the bottom of the road, ran a book based on trust. Every so often, my dad would settle up. Occasionally, we hid in the kitchen from Tommy the milkman, because mum had not got enough money to pay him that week. In the end the accounts were settled, because the Co-op was part of our community and there was a relationship of trust between us. That is one of the key benefits of co-ops.

[Chris Evans]

That sums up the benefits of co-ops for so many communities, including mine, and those in my hon. Friend’s constituency. When we grew up in those communities, there was a level of trust. We trusted one another. We knew one another and we grew up in communities where we knew everybody. It sounds romantic to say it now, but we did know our next-door neighbour. I knew everybody in the street that I grew up in. I do not think that I do now. That is the saddest thing.

The important thing is that the co-operatives brought about trust and a sense of values and ethics, which we do not see in society very often. That is why it is important for people to support their local co-operative, such as the one run by Sid at the end of the street, who had a savings club for Christmas. My hon. Friend says that his family used to hide from Tommy the milkman behind the settee. I wonder whether his family still speak to him.

[David Mowat (Warrington South) (Con)]

Many Government Members accept the points being made about trust and the model of the co-operative. However, I hope that the hon. Gentleman will not conclude without considering the recent collapse of the Co-operative bank and the fact that the co-operative movement chose not to bail it out. The bond holders, many of whom are pensioners and not well off, are having to pay to deal with that. Does he consider that some points made about ethics and trust could be undermined by that? I am not asking that in a pejorative way, but because I am interested in the hon. Gentleman’s reaction.

[Chris Evans]

There is still a lot to work out with the Co-operative bank. These issues are serious. I am not going to deny those things, but the central thrust of what I am saying is that co-operatives have worked and there is still a lot to done about that.

[Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)]

It is appropriate to raise the Co-operative bank in this debate, but when doing so we have to consider the Britannia takeover in relation to the situation that the Co-operative bank finds itself in. It would be wrong to besmirch the values or the running of the co-operative movement during this difficult time. Of course, that situation must be faced up to, but we should still consider that, considering the whole array of banking and financial institutions in this country, the co-operative movement—the Co-operative bank—is still very much up there in terms of best practice in this country, difficult as this time is.

[Chris Evans]

I agree with my hon. Friend; he is correct.

[David Mowat]

I thank the hon. Gentleman for giving way again; I shall not make another contribution after this. I accept that it was the Britannia. It was also mismanagement of a large IT project. I wonder whether one of the lessons to be learned is that there is a size issue in terms of types of activity: whether something that grew out of being a credit union into something much more than that did not have the management processes necessary. I wonder whether there is an issue there that the hon. Gentleman might consider.

[Chris Evans]

Not being a member of the management team myself or privy to decisions in the Co-operative bank, the best people to answer that are on the board of that bank. The Britannia takeover was particularly difficult for the Co-operative bank and has had a major effect.

We talk about IT projects, and we have seen such things happen in government as well. My predecessor in Islwyn served on the Public Accounts Committee, and when I worked for him I saw that a lot of problems reported by the National Audit Office were often to do with IT programmes. The lesson to be learned for the Co-operative bank, as with others, is that when investing in IT, if it goes wrong it really does go wrong.

[Andy Sawford]

I sense that my hon. Friend has many other important issues to address, but does he agree that it is important that we use the right language to describe what has happened at the Co-operative bank in recent months? Terms such as “collapse” are not helpful in assuring savers of the bank’s future. We ought to recognise that, unlike other banks and financial institutions, the Co-operative bank has not sought a bail-out from the Government but has righted itself, and we all should support it in what I hope is a sustainable future.

[Chris Evans]

My hon. Friend is absolutely right. The Co-operative bank—along with other mutuals—is the only bank that did not take a bail-out from the Government. If we have learned anything from the financial crash of 2008, it is that the language we use can have a serious effect on consumer confidence. I do not think any of us will forget the queues outside Northern Rock on that Saturday, which all came from a few misjudged words. The Co-operative bank is still on the high street, is still flourishing and has righted itself. We all have to be careful in the language we use. As the hon. Member for Warrington South (David Mowat) said, there are lessons to be learned, and I am sure they will be learned in the next couple of years.

We do not want to create a breeding ground for loan sharks and high street lenders. Sadly, Provident, Wonga, Cash Converters and Shopacheck are now household names. When people have nowhere else to turn, and when there is no food in the fridge or money left in the electric, where are they going to go? I spoke earlier about Islwyn community credit union, and I am pleased that in Wales everyone has access to a credit union. I have spoken previously about expanding the role of credit unions, which do not have to lend solely to individuals; they can lend to businesses, too, whether they are micro-businesses or small businesses that cannot get money elsewhere. We need to see more from the Government to promote co-operative finance and mutuals so that they live up to the promises they made when they came into office.

It is worth remembering that conventional banks used £60 billion when they were bailed out, but the mutual sector did not use any money at all. Bradford & Bingley operated as a building society for 150 years, yet it lasted only 10 years as a bank. I hope that the Minister will explain exactly what the Government are doing to encourage mutuality in the banking sector. I also hope he will address the potential for co-operatives in the energy and housing sectors, because I believe they could form the basis for real and lasting economic growth.

I will end by citing a statistic that demonstrates the potential of a co-operative economy. The UK is ranked 15th in global GDP, but the UK co-operative economy is the eighth largest globally. We are clearly doing something right, but with more than 1 million co-operatives in the world serving 1 billion members, we have the potential to do a lot more. There is growing consensus on the factors that serve business excellence—a clear mission, better customer service and, above all, fairness and transparency. At the heart of the success of the co-operative movement are the fundamental values of equality, democracy and participation, and therefore co-operatives should be encouraged and adopted.

[Several hon. Members]

rose—

Finance Bill

Chris Evans Excerpts

Monday 1st July 2013 Commons Chamber

[Sir Edward Leigh]

Of course. There should be a huge health warning on Labour’s proposal. British people should be warned that it is not footballers or bankers who will suffer, but middle England—people who work really hard to create small and successful companies, who are halfway up the corporate tree and who are near the top of the public sector. Moreover, it is those precise people in the public sector whom we need to incentivise to make efficiency savings, if we are to have a successful economy.

People should not swallow the lie that this is only about bankers and footballers. They can look after themselves in any country—they always have and they always will—and if there is a Labour Government, I predict that they will get richer and richer. We should forget them and concentrate on middle England.

Finally, if the Labour party wants to get back into power it should remember what Tony Blair did. He was its most successful leader ever, because he realised that politics had to be won on the centre ground. At the moment, Labour is going nowhere.

[Chris Evans (Islwyn) (Lab/Co-op)]

It is always a joy to follow the hon. Member for Gainsborough (Sir Edward Leigh). In a different life, when I worked for my predecessor, he was the Chairman of the Public Accounts Committee and I spent many a happy afternoon at the back of the room listening to him pontificating and taking on the tax dodgers and anyone else the National Audit Office thought was a little bit dodgy. I miss those days.

The more time I spend in this House and the more I listen to Government Members, the more I sense that all we do is talk about history and hark back to the past. Government Members like to talk about 13 years of Labour “misrule” and 18 golden years of Tory Government. The one conclusion that I have come to from studying economics at A-level and from listening to many hon. and right hon. Members speak in this House is that it is not possible to run the economy like a scientific discipline. It is not like that.

Hon. Members have mentioned the Laffer curve, which was meant to be the wonderful idea of its time. In 1980, a future US President—he was about to become vice-president at that time—said that trickle-down economics was voodoo economics. He was right then and he is right now. The hon. Member for Gainsborough gave the Labour party some advice and I want to do the same for his party. The Conservative party is still in the grip of an economic theory that failed.

I do not want to talk about history, even though I am an historian myself. I do not want to go back to the ’80s—there is no point in talking about that. It is a moot argument. I want to talk about the future, but in 1989 and 1990 we had the worst recession ever. That followed the recession in 1981, which, at the time, was the worst recession that we had had. Trickle-down economics is based on the mad belief that a tax cut for the very rich will somehow trickle down through society. It has never worked. Quite simply, that is common sense.

[Mr Graham Stuart]

I just want to make a simple point. Every time the tax rate for the richest was cut under the previous Conservative Government, the amount paid by the top 10% went up in cash terms and in relation to what was paid by the rest of the population. In other words, every time the tax rate was reduced, the amount that the rich paid went up and the percentage of the overall pot that they paid went up. How does the hon. Gentleman explain that trickle-down effect?

--- Later in debate ---

[Chris Evans]

The tool that the previous Tory Government used, which this Tory Government are using as well, was value added tax. Indirect taxation has always gone up under a Tory Government. Value added tax went up from 12% to 15%, and then to 17.5%. It is now 20%. This Government have also given a tax cut to the highest earners in society. The problem with indirect taxation is that everybody has to pay it. That is why the tax take always goes up. Such taxation is regressive. It does not matter what people are earning; everybody has to pay it. People who are very rich and have means do not have to worry about it, but those who are struggling at the bottom, such as those who are struggling to get by on the state pension, have to pay it, whatever the rate is.

[Richard Fuller]

I am very interested in what the hon. Gentleman is saying. Would he therefore approve of a permanent reduction in VAT, compensated for by an increase in income tax?

[Chris Evans]

As I was saying, there is a problem with trying to impose a scientific discipline on something that has nothing to do with science. I do not believe in that kind of economics. We have to take stock of the situation that we find ourselves in. That might have been a way forward in the ’90s, given the economic situation that was faced then. However, we do not know what we should do until we are faced with the economic situation.

[Richard Fuller]

It is almost impossible to have a debate when Opposition Members talk about the past but when questioned about what they would do just say, “We don’t know. We have no idea.” Presumably the hon. Gentleman will at least accept that if he is proposing a reduction in value added tax, given the state of the public finances, a future Labour Government would have to increase income tax. He must also accept that the yield on income tax comes from middle-earning people up and down the country. That is what a future Labour Government would do.

[Chris Evans]

The hon. Gentleman is not listening to what I am saying, if I may be so bold. I did not make any commitment to reducing VAT. I was harking back to the economic theory of the Laffer curve and supply-side economics, under which indirect taxation is used to cut taxes for those at the very top. When the top rate of tax is cut for people at the top, they have mobility and can spend the money in different countries. We have heard that already. That applies to footballers as well. However, when the tax rate is cut for middle earners, they tend to spend the money on the high street and stimulate the economy in that way.

I do not want anybody in this House to think that I have a problem with millionaires. Like the hon. Member for Gainsborough, I have a lot of friends who want to be millionaires. There is nothing wrong with aspiring to be something better. That is what the Labour party is about. I am sorry to hark back to his speech so much, but the hon. Member for Gainsborough said that that is what we understood in the mid-’90s. Human beings aspire to something better. There is nothing wrong with wanting to be a millionaire. My point is that if we could find the money to give a 5p tax cut to higher earners, why could we not do that for middle income earners? A 1p tax cut for people under the top rate of tax would have done more to stimulate the economy than a 5p tax cut for higher earners, because they will spend the money elsewhere.

I also sense that this is a moral argument. Whatever I believe about cutting tax for the very richest in society, a lot of the people I talked to when the top rate of tax was cut were very angry, especially constituents of mine. They said to me that it is the people who are riding in limousines who are getting the tax cut, not the ones who are driving white vans and keeping this country working. Those are the people who are feeling the pain. We should look at the level of anger.

If we look at a breakdown of the figures, taking into account all the changes to tax, tax credits and benefits that have been introduced since 2010, we see that households in the UK will be an average of £891 worse off this year, or £17 a week. A one-earner couple with children will be a staggering £3,995.65 worse off this year. For a multi-family household with children, it will be £1,723.88. It is all very well quoting statistics—I do it all the time, and everybody is guilty of it—but I am sure that every family affected aspire to something better for their children. Yet the message they are getting from the Government is that they should be worse off.

[Mr Graham Stuart]

The hon. Gentleman is being generous in giving way. I hope that he tells his constituents the truth about where the Government have concentrated their efforts to lower tax. The main effort has gone into lifting the tax threshold. Does he support the fact that, under this Government, people can earn up to £10,000 and not pay any income tax, because the Government are determined to try to make work pay?

[Chris Evans]

Surprisingly, I agree with the hon. Gentleman on his last comment—work does pay. At the end of the day, we can have any Government scheme we want to bring people out of poverty, but there is only one way out, and that is work. The only way out of the current difficulty is for people in work to pay their taxes. If there are even more cuts to the public sector, there will be even more people out of work and the welfare bill will go up, defeating the object of the exercise. It will lead to a high welfare bill, which will have to be paid for, and a low tax yield because of people being out of work.

I say to the hon. Gentleman that we have to wake up to the fact that the social benefits that we want to enjoy will come only from businesses being successful. We must do all we can to ensure that we have a fair, simple and transparent tax regime. How can we stimulate the economy when it seems that those in the middle are being squeezed?

The hon. Gentleman asks whether I talk to my constituents. I do, and those in social housing or council housing are concerned about the so-called bedroom tax. Some 80% of social tenants in Caerphilly county borough are in two or three-bedroom houses. That is not their fault, because no one-bedroom flats or houses are being built. After the war, when Aneurin Bevan invested in social housing, he invested in family homes so that people could bring up children and go to work.

We have heard from the Government, and from hon. Members today, about how much the cut in tax from 50p to 45p will raise. Everybody seems to be able to predict the future—every Government Member who has spoken today has done so, and even the Exchequer Secretary will be guilty of it. They seem to think that they are some sort of latter-day seer, guru or wise man who can see that in future, it will be wonderful under the Tories whereas it would be terrible under the Labour party. However, we do not know what is next. We might be lucky—we might find gas, or we might find oil off the Pembrokeshire coast or more oil in the North sea, which will stimulate the economy. On the other hand, we might have another financial crisis. We do not know. When we talk about what the tax cut will raise, we are basically licking our finger, putting it in the air and wondering which way the wind is going to blow.

To get back to the new clause, it is important that we have a review of the tax cut.

[Barbara Keeley]

One thing that is predictable is that the bedroom tax, which my hon. Friend mentioned, is going to lead to a hit of about £4 million in Salford, which will be one of the worst hit places in the country. That money will be taken out of pockets and shop tills in our local communities. It is now predicted that the arrears that will be run up as a result will also run into the millions. In fact, it looks like it may well get to the point where it is not worth having made the change, because those arrears will not be counteracted and because of the £4 million taken out of our local economy. That situation is becoming evident as the weeks go by, and we can predict what the result will be in a few months.

[Chris Evans]

I thank my hon. Friend for that wise intervention. Welfare reform is a warm and nice thing to say, especially for those of a right-wing bent who want to take out the scroungers and make them pay. But when benefits start to be cut and people are kicked out of their houses, it is a serious concern—I do not want to be melodramatic—that we could see the return of the workhouse.

In constituencies such as mine and those of my hon. Friends, I am fearful that we will see homelessness on a wide scale. The Government may have thought it was a good idea at the time to cap benefits and introduce the bedroom tax, but when we have a huge homeless population and emergency schemes need to be introduced to sort that out, I am afraid that it will be the taxpayer who picks up the bill.

Does the squeeze on benefits motivate anybody to go to work? If someone has arrears or debt and is seeing more of their pay go down the drain, why would they go to work? The Government should be motivating people to go to work; they should be tackling worklessness. Instead of cutting welfare, they should be stepping in to stimulate people to go to work, and talking to those people individually.

We talk about economics all the time, but it is not a scientific discipline—it is about people and how they react to certain circumstances. If I found myself out of work, my needs would be different from those of someone with a lower educational attainment or problems with reading and writing. However, we should be able to say to that person, “What is stopping you going to work? What are the barriers?” What can we provide to get people into work? Yes, that will cost money up front, but in the long term the country will win because of it.

Let me return to my point about putting a finger in the air and wondering which way the wind will blow. It has been estimated that 267,000 people who earn more than £150,000—including 13,000 people who earn more than £1 million—will receive an average tax cut of £100,000, according to figures from HMRC. In contrast, child benefit will be frozen for a third year, and tax credits and other working-age benefits will increase by just 1%, and these real-terms cuts will affect a shocking 9.7 million households. Can we understand that? My constituency has 56,000 electors, but 9.7 million households will be affected by this measure and each person will have an individual story and will have struggled.

The figure of 9.7 million in relation to benefits might conjure up an image of worklessness, but 7.3 million of those households—75% of all households claiming benefits—are in work. That is the crux of the problem we face. We talk about welfare reform and so-called scroungers, but the people suffering most are those we are trying to encourage—those who work hard and play by the rules but who are locked in an economic theory that has clearly failed. Some 2.4 million families will pay on average £138 more in council tax in 2013 as a result of cuts to council tax benefit. That is the ultimate failure of Government—six in 10 working people are claiming benefits. For all the talk of work paying, for many people work is not paying.

Let me return to what I said about the new clause. We need a report. I sat on the Finance Bill Committee with the Minister—I feel sorry for him, as I would for anybody who sat through that. Every day he felt as if he was batting off different reviews. However, this is such an important issue, and the coalition Government have made it such a cornerstone policy, that it needs to be reviewed. We have heard so much about it being wonderful, but we must test the theory: is it stimulating the economy, bringing money through and making work pay? We will not know unless we have a review. That is why it is so important.

I hope the Minister listens. I have a lot of time for him. As I have said, I was in Committee with him: he is sensible and takes a rational view of these matters—[Interruption.] That is the problem—we judge a man by his friends. This is such a cornerstone policy that I hope the Minister will give us some prospect of monitoring it.

I do not want to go into the history of the 1980s and tax cuts again, because I have touched on it already. But I am deeply concerned that we again face a Government who believe in an economic theory that ultimately failed the country. It was not just that we lost heavy industry in the valleys: I think of all the people in the 1980s who were motivated by the dream of starting a business or buying their own homes. By the end, their businesses went bust or they were forced into rented accommodation because they could no longer afford the mortgage. For all that Government’s lauding of their control of inflation, it was through the roof and interest rates hit 15%. We have heard recently from the Governor of the Bank of England that interest rates will go up next year, and I am deeply concerned that this Government will blindly follow the theory of supply-side economics, of Karl Popper and of leaving everything to the market.

Governments have responsibilities. They have a responsibility to create the environment for businesses to flourish and for people to achieve their dreams. I came into politics because I wanted people to aspire to something better, but the Government are giving the very rich a tax cut and everybody else is losing out—660,000 people will lose an average £728 a year under the bedroom tax. Why are the people at the bottom—the people we should be helping—feeling the pain?

I have said before many times that I do not want to knock the bankers. I worked in banking myself and I know how difficult the industry is. I have met my fair share of bankers and they are not all bad, and banking is the cornerstone of this economy, so I always tread carefully when we talk about bankers, but any industry has people who are guilty of criminal activity. In this case, the guilty have not been punished for their criminal activity. It is the Government’s failure that has allowed people to walk away.

[Richard Fuller]

The hon. Gentleman may be right about that, but the acts that he is complaining about happened under the last Labour Government, and it is the laxity of their regulation that means that people are not facing criminal prosecutions now.

[Chris Evans]

When Conservative Members were talking about the Laffer curve, Ronald Reagan came to mind. For some reason, when the hon. Gentleman stood up, Ronald Reagan came to mind again, as I recalled him saying to Jimmy Carter in the 1980 election campaign, “There you go again.” The person sitting tonight at their kitchen table, worrying about paying the rent, the mortgage, the gas bill or the electric bill, and watching this debate—although given the time they will probably be watching “Pointless”—[Interruption.] I walked into that one. They might be watching ITV instead—

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. I think that is enough about television shows.

[Chris Evans]

I was just wondering what the man at the kitchen table was watching. I apologise, Mr Deputy Speaker. All we hear is the same old debate and the same charge that it is all the Labour Government’s fault, so let me challenge the hon. Member for Bedford (Richard Fuller).

--- Later in debate ---

[Mike Thornton (Eastleigh) (LD)]

The hon. Gentleman talks about banking fraud. The laws that would have been broken would have been laws under the Labour Government, and most of us do not believe in retrospective legislation. I agree with him that most bankers are decent people, but there have been exceptions. Unfortunately, those people did not actually break laws; they simply took appalling decisions with other people’s money, which I agree is a disgrace. As far as I know, however, we have seen no accusations of banking fraud; I could be wrong, but that is my understanding.

[Chris Evans]

I agree that we do not know, as there has been no investigation.

[Mr David Ruffley (Bury St Edmunds) (Con)]

To help the hon. Gentleman out here, if he had been in the Chamber this time last year, he would recall the Chancellor of the Exchequer saying in respect of LIBOR rigging that he had referred the facts in those cases to the Serious Fraud Office, which is, as we speak, still undertaking a review. Before the hon. Gentleman says, “Why haven’t the Government done anything?” let me remind him of the core principle under the British constitution of the independence of prosecutorial authorities from Ministers. Will he concede that?

[Chris Evans]

Yes, but I should tell the hon. Gentleman that I was in the Treasury Committee when Bob Diamond came to give evidence about LIBOR and that I was in the Chamber when the Chancellor announced the investigation. I listened to it and it made me sad. It made me sad because I realised for the very first time that people do not trust anybody any more. That is the problem. It goes much deeper than economics, politics, banking or whatever. People simply do not trust others any more. [Interruption.] I know that I am digressing from the new clause, Mr Deputy Speaker, and that you are itching to stop me. I want to put it on the record, however, that I genuinely feel that people do not trust each other any more. That is the saddest thing of all about this issue. It does not matter whether we are talking about Conservatives or Labour, people just do not trust politicians, journalists, lawyers or others. This is a much deeper problem than anything else for our society.

That brings me to the issue of anger about what the family man or family woman will save from what is on the kitchen table tonight. When those people hear about the tax cuts for the rich, I am sure they will think of those bankers who may or may not have committed crimes, of the journalists who may or may not have committed crimes, and of the editors of national newspapers—people earning six-figure salaries—and they will believe that those are the people who will get rewarded. That may not be the case, but that is the perception, and as we all know as politicians, the perception is usually stronger than reality. What members of the public will think about this Government and about this place is that they are run by an elite who are more interested in helping out their friends in the City than anything else. That is the real tragedy of this issue.

I have sat here and heard all the arguments about the tax cuts. Yes, I have attacked what I believe is a failed economic theory, but the truth is that the Government won the election in May 2010. I do not like that personally, and I hope that we can turn that around in 2015. The Government have the right to put whatever they want into the Finance Bill, and we cannot change it, much as I would have loved to table an amendment to abolish this tax cut. I cannot, and all we can do is bring about a review. This review is crucial because it will allow us to see how much this cut for millionaires is affecting the British economy.

This may be deemed an aside, Mr Deputy Speaker, and you may call me to order, but let me ask the Minister one more question. When the Treasury was considering the 5p tax cut, did it also consider a 1p tax cut for those whose earnings were below the threshold? If it did not consider that option, why did it not do so, and if it did, why did it rule it out?

You are clearly champing at the bit, Mr Deputy Speaker. Perhaps you want me to wind up my speech, and I shall try to do so. [Interruption.] Do not get too enthusiastic, please!

We need a review. We need to know the facts, because this is so important.

[The Exchequer Secretary to the Treasury (Mr David Gauke)]

We have heard a couple of rather lengthy speeches about a topic that is fairly familiar to those of us who have dealt with Finance Bills in the past. We discussed the reduction in the top rate of income tax at some length during the early, middle and late stages of last year’s Bill, and we have discussed it on a number of occasions during our earlier debates on this Bill. It is striking, however, that the number of Labour Back Benchers present during much of today’s debate so far has been three or perhaps four. Although we have heard some passionate and lengthy speeches, I am not sure that I need to make a lengthy speech in response, but a few basic points are worth making.

The Government agree that the wealthiest should make the biggest contribution to deficit reduction, and it will be clear to anyone who looks at our record across the board that we have stuck to that principle. In the 2010 Budget, the higher rate of capital gains tax was increased. In the 2011 Budget, we tackled a major area of tax avoidance, namely disguised remuneration. The Labour party opposed that measure in Committee, but we tackled the problem none the less, and our action has resulted in considerable extra revenue, particularly from high earners.

The 2012 Budget, which contained the measure that has provided the subject matter of most of today’s debate—the cut in the 50p rate of income tax—also introduced a new rate of stamp duty for high-value homes, measures to clamp down on stamp duty land tax avoidance, and a cap on reliefs used in the tax system, which raised an amount considerably larger than the cost of the cut in the 50p rate. The 2012 autumn statement provided for action to reduce the cost to the Exchequer of pensions tax relief, and the 2013 Budget contained further measures to tackle offshore tax evasion by, in particular, high earners.

We clearly have a strong record in this respect. We have gained additional revenue not only from capital gains tax and stamp duty, but—as is shown by the distributional analysis—from the income tax paid by the top 1% of earners. That was mentioned by a number of my hon. Friends, including my hon. Friend the Member for Gainsborough (Sir Edward Leigh), who pointed out that we are receiving more from the top 1% than the Labour party ever managed to.

It is interesting to note that the proportion of income tax contributed by the top 1% exceeded 25% in only one year during Labour’s time in office, namely 2009-10, which was a slightly strange year because a large amount of income was brought forward so that the tax could be paid at a rate of 40% rather than 50%. In that year, 26.5% of income tax was paid by the top 1%, but in the remaining years the proportion was 25% or lower. We estimate that in 2013-14, with the new lower rate of 45%, nearly 30%—to be precise, 29.8%—of income tax receipts will come from the top 1%. The problem with the 50p rate was that it was not very good at doing what a tax is supposed to do—raising revenue. That is the Labour party’s essential difficulty in advocating a 50p rate of income tax.

--- Later in debate ---

[Sheila Gilmore]

The link is that some would argue that a mansion tax would be oppressive on people who may live in a house that is valued at more than £2 million, but have a very low income, and they should not be expected to find that payment. As has been suggested to my constituent and others, such people may wish to consider taking in a lodger, releasing some of their equity or downsizing. I suspect that downsizing with that type of property would be easy. I would hope, therefore, that such arguments would not be made against a mansion tax. I hope that the Government will support the new clause, because if their arguments are as strong as they say, they will be able to disprove our case very quickly.

[Chris Evans]

I feel as though this is part two of my speech. I listen to Government Members, and I hear the sound of the creation of two Britains. We have the Britain of the elite who are protected by the Government, who bring about tax cuts for the most affluent in our society. Then we have the other Britain—people who are playing by the rules but have seen their benefits squeezed, their tax credits cut and their council tax benefits cut. When they go shopping, their bills have increased because of the VAT increase. Nor is this society encouraging work, because work does not pay. Those people in work can be reliant on the benefits system, but the policies of the coalition Government are skewed against them—the vast majority of people in this country who are playing by the rules and want something better from their lives.

I feel sorry for the hon. Member for Eastleigh (Mike Thornton), who has not been a Member for very long. He is in his place alone as we challenge the Liberal Democrats on their approach to the mansion tax. As on tuition fees, VAT, tax avoidance and the tax cut for the most affluent, what they said in opposition, when they sat on this side of the House with no hope of being in government, was a different kettle of fish from what they say in government.

I can never clear my mind of the image of the Deputy Prime Minister, in a party political broadcast, implying—I do not wish to use unparliamentary language—that anyone who was not a Liberal Democrat was a teller of mistruths. Students remember that party political broadcast saying that tuition fees would not go up under any Liberal Democrat Government. It was a different matter when they found themselves in government.

In February, the Deputy Prime Minister said:

“I continue to believe we should ask for what would be a modest contribution from the very wealthy, either in the form of a Mansion tax—a 1% levy on properties worth more than £2m—applied just to the value over and above £2m; my preferred option. Or, alternatively, we could introduce new council tax bands at the top end, again, affecting properties worth over £2m…Nothing could do more to demonstrate a commitment to greater fairness in our tax system. I will continue to make this argument, in this Coalition and beyond. My approach is simple: taxes on mansions; tax cuts for millions.”

What did the Deputy Prime Minister do in the coalition? Did he sit there and fight for a mansion tax? No, the evidence—and we have to go on the evidence—is against it. In every major decision that the coalition has made, many of them unpopular, the Deputy Prime Minister has been found wanting. Let me explain something to the hon. Member for Eastleigh, who, in fairness, is the only Liberal Democrat Member who has sat through this entire debate. If that is who his leader is—if that is what his leader is about—he should ask whether the Deputy Prime Minister is equipped to lead the Liberal Democrats into the next election.

[David Wright]

It gets even worse for the Liberal Democrats. Not only did the Deputy Prime Minister say in that discussion point that he was a supporter of the mansion tax, but the Business Secretary went on to say to the BBC in March this year:

“Nick Clegg and I are very strong supporters of the mansion tax”.

I am really pleased to hear that, and I am sure my hon. Friend will be, too. I await to see how they will vote in the Lobby this evening.

[Chris Evans]

I, too, hope to see them in the Lobby, but I am sure that they will not be there. That is the wonderful thing about the Liberal Democrats: it is the only party that can support something—have the bare-faced cheek to stand up in favour of something—and then vote for the exact opposite in the Division Lobby. That is what the Liberal Democrats should remember: in the marginal seats that they need to hold on to, they will be judged on their priorities—[Interruption.] Does the hon. Member for Eastleigh want me to give way to him, or is he happy to listen? [Interruption.] Indeed, we do not usually hear from a Liberal Democrat.

The Liberal Democrats will be judged on their priorities, and their priorities have not been what they said they would be. They are not for the students; they are not for the elderly; they are not for the poorest paid in society: they are simply there to prop up this coalition Government. They are becoming nothing but voting fodder for this Tory Administration. I notice that the Tory Members were nodding when I said that. If any further proof were required about who is in the senior part of—

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. Mr Evans, I gave you a little leniency on the earlier new clause, but on this one, we have got so far off the mark that I do not know how to drag you back. I am worried about the time ticking away, and it would be better for the House if you spoke to the new clause. I am sure that that is exactly what you are going to do next.

[Chris Evans]

I have the Bill in my hand, Mr Deputy Speaker, and I am going to come to the relevant clause.

[Mr Deputy Speaker]

Having the clause in the hon. Gentleman’s hand is not necessarily helpful; it is what he says that matters more.

[Chris Evans]

I was just coming on to that point, Mr Deputy Speaker, I just needed time.

[Mr Deputy Speaker]

And you should speak to the Chair, too.

[Chris Evans]

I ask anybody who says that this mansion tax cannot be introduced to read clause 92, which relates to the annual tax on enveloped dwellings. Under the heading of “Charge to tax”, it states:

“A tax (called ‘annual tax on enveloped dwellings’) is to be charged in accordance with this Part…Tax charged in respect of the chargeable interest if on one or more days in a chargeable period…the interest is a single-dwelling interest and has a taxable value of more than £2 million, and…a company, partnership or collective investment scheme meets the ownership condition with respect to the interest.”

That seems very much like a mansion tax to me. Clause 97 goes on to state:

“The amount of tax charged for a chargeable period with respect to a single-dwelling interest is stated in subsection (2) or (3).”

A table then sets out the annual chargeable amounts, highlighting the taxable value of the interest on the relevant day. It shows that if the property is worth more than £2 million but not more than £5 million, it would raise £15,000; if it is worth more than £5 million but not more than £10 million, it would raise £35,000; if it is worth more than £10 million but not more than £20 million, it would raise £70,000; and if it is worth more than £20 million, it would bring in a whopping great £140,000. If that is not a step towards a mansion tax, I do not know what it is. But still—

[Mr Deputy Speaker]

Order. I can cope a little bit with this speech. The Liberals may well want to hear the hon. Gentleman, but he has to address the Chair. Constantly looking at the Liberal is not helpful for Mr Thornton, but it would be helpful for Mr Evans if he were looking at the Deputy Speaker. I am sure that the rest of his speech will be conducted through this Chair, rather than through the Opposition chair—much as Mr Leslie would provide him with advice, he really should speak to this Chair.

[Chris Evans]

I am sorry, Mr Deputy Speaker. Much as I think the Liberal Democrats believe that the world revolves around them—[Interruption.]

[Jonathan Edwards]

Let me try to help the hon. Gentleman out. He will be aware that in Wales we had a council tax revaluation for domestic properties in 2005. Does he think that a similar evaluation for England might achieve the objectives of a mansion tax and probably raise far more?

[Chris Evans]

I find myself in shock, but I agree with a member of the Welsh nationalist party. There is some merit in that idea, which is something we can look at.

This new clause presents an opportunity for the Conservatives to reverse the inequality that I have talked about—the two Britains that are starting to emerge in our society. If we agree with a mansion tax, we will be able to fund a tax cut for millions of people. We support the increase in personal allowances, but the reintroduction of the 10p tax would mean that work pays once again. I know that the Tories will say that we abolished it. We must be big enough in politics to admit that we got something wrong, and we got it wrong when we abolished the 10p tax rate, which would give the lowest in society an opportunity to go out to work and make work pay. This is what I mean when I talk about how difficult it is to get back to work once someone is out of it. We can do this today.

[Bill Esterson (Sefton Central) (Lab)]

My hon. Friend makes an important point about how work will pay. The other side of the coin is how the 10p tax rate would make it advantageous for employers to take people on, because it becomes far more attractive to employers to do that. Does he see that benefit for employers, too?

[Chris Evans]

Yes, I do. I think this is a win-win situation for everyone. Yes, I have said that we got the 10p tax wrong, but I think a lot of employers would welcome a 10p tax rate. As I have said here before, Opposition Members agree that work is the only way out of poverty, and a mansion tax could provide a way forward on that.

The new clause deals with a mansion tax. Labour has often been accused of having no policies and of not setting out our policies or of not being forthcoming enough, but we have said that we need to introduce a mansion tax to bring about a 10p tax cut and bring some fairness into society. Fair taxation should not be a Labour issue, a Tory issue or a Lib Dem issue; it should be across party. Fair taxation should interest us all, but without a fairer and less complex system, we cannot hope to achieve what we want, which is to see more people in work, paying their taxes and bringing down the deficit that way. With that, and after a number of interventions from you, Mr Deputy Speaker, I shall sit down.

[David Wright]

I was in the Chamber at the opening of the debate, and I would like to make a brief contribution on this subject. I am keen to see us move the debate forward a little on the issue of progressive taxation. My hon. Friend the Member for Islwyn (Chris Evans) was right to say that the Labour party was wrong to abandon the 10p tax rate before the last election, as it caused a good deal of concern in constituencies right across the country. It is important that we reassess that policy position now.

It is useful that we are matching the commitment to reintroduce the 10p band with a proposal for a mansion tax, linking the two objectives, and I am particularly supportive of the mansion tax. As we heard in an earlier segment of the debate, one of the key issues is tax avoidance, and Government Members made great play of the fact that the higher rate of income tax introduced at the end of the last Labour Government was not going to deliver much revenue because people would attempt to avoid it. I can understand that argument, but I think they are wrong, because we did not have a long enough period to see it work though, and not enough time was given to allow the new top rate we brought in to bed down.

One thing that can be said of the mansion tax is that one can with certainty ensure that income is being delivered for the Exchequer. Clearly, by their very nature, properties do not move. Some Members have referred to the possibility of revaluation of the council tax base. I do not think that there should be a broad revaluation in England at this stage, but I do think that it would be logical to apply a mansion tax to the largest properties in the country, given the need to generate a tax system that is fair and progressive.

Finance (No. 2) Bill

Chris Evans Excerpts

Monday 15th April 2013 Commons Chamber

[Chris Evans (Islwyn) (Lab/Co-op)]

If there was one test that the Government put in place from the day that they got into power, it was reducing the deficit. Three years on, what do we see? Borrowing is increasing by £245 billion and there is no chance of the deficit being paid off by 2015. By 2016-17, debt as a ratio of GDP will be 85.4%. Those are damning figures.

On 23 April 2012, the Prime Minister said:

“We’re involved in an economic rescue mission, but we’re not just a bunch of accountants dealing with a deficit, there’s also a driving passion and vision to change this country and make it much more on the side of hard-working people who do the right thing.”

Unfortunately, those who work hard and play by the rules have seen the top earners in society get a tax cut of 5p. I will not denigrate success: there is nothing wrong with people striving to work hard and enjoy the fruits of their labour; aspiration is what the party I represent is about and it is something that we should believe in. However, if the Government could find a tax cut of 5p for the highest earners, why could they not do it for the middle-income earners, for the families who are worried about their jobs and for the people sitting around their kitchen tables today who see the price of their groceries going up all the time, inflation going up and real wages dropping by 2.4%? Who is standing up for them? Nobody.

We hear wonderful words and statistics from Government Members, but the simple fact is this: we are still stuck in the grip of an economic theory that failed. We were told that tax cuts for the very rich would trickle down through society. We were told that the highest earners would somehow create jobs. What did we see by the end of the ’80s? We saw a record recession in 1990, with more houses repossessed and more businesses going bust than ever before, all because of the belief that we should be on the side of those who ride in limousines, rather than those who go to work every day in their vans.

I believe in one thing. It may be old-fashioned, but I believe that work is the only way out of poverty and the only way to reduce the ills of this country. Having people in work and paying their taxes is the only way to reduce not only the deficit, but the national debt. It is up to this Government and to any Government, whether they be red, blue, yellow or whatever blue and yellow are when they come together, to create jobs and to reduce all the barriers to people getting into work.

What does the Bill do? We have heard Government Members lauding the right to buy scheme. We have heard them talk about getting more people on the property ladder, even though rents are through the roof and it is hard to get a deposit. The average age of a person buying their first house is now 37. At that age, my mother and father had already had two children and got divorced—they had already lived their life. Now, people of that age are still struggling to get on the ladder.

What is the problem? It is not home ownership or high rents, but the lack of housing in this country. Instead of following the pledge of the Labour party to build 100,000 new houses using the sell-off of the 4G spectrum, the Government have ignored the problem completely. How many people will take advantage of the right to buy scheme? Will it go on failing like it is? Only 1,500 people took advantage of it last year. That is not a scheme that will create a nation of home owners; all it does is provide warm words. Whether we are on the right or the left, we have to get to a point in this country where the best ideas are used. Surely, the best idea is to use the money from the 4G spectrum to invest in homes and thereby create jobs.

The next matter that I want to talk about is barriers to work. We can quote statistics all we want, but the simple fact, as Harold Wilson said, is that it does not matter what the employment rate is in the country; for an unemployed person, the unemployment rate is 100%. Most of the people with children whom I talk to in my surgery and around my constituency say that the biggest barrier to getting back to work is child care issues. That is the elephant in the room. We can talk about job creation schemes all we want, but if people have child care issues, their priority is to look after their child.

On 19 March, a Treasury press release lauded the

“New scheme to bring tax-free childcare for 2.5 million working families”.

When I saw that, I applauded it and thought that it was the way forward. However, I then found out that the scheme will not come in until 2015. That means that people who have child care issues now face cuts to their child tax credit. A family with two children have already seen a cut of £1,500 a year in their child care funding. There is not only a cut in child care funding; since 2010, there are 400 fewer Sure Start centres and early years budgets have been slashed. That affects the economy, because if parents cannot go back to work, whether they are mums or dads, it adds to the welfare bill. I genuinely believe that it is economic madness to cut jobs or not allow people to go back into work if it creates a welfare bill that adds more and more to the deficit.

I will move on to another barrier to work. Like many hon. Members, I am bombarded by e-mails and letters from the FairFuelUK campaign. That must be the campaign from which I have received the most e-mails, letters and communications. However, those communications are coming not from a national campaign, but from the ordinary motorist in work. He is struggling to get to work. Again, the Government laud their freezing of petrol duty in September and say that they are on the side of hard-working families and people who need their car for work.

[Andy Sawford]

Does my hon. Friend agree that if the Government had taken the sensible advice of shadow Treasury Ministers to cut VAT, that would have provided much more significant help with the price of fuel than their small offering?

[Chris Evans]

I thank my hon. Friend, because I was building up to that point.

The Conservatives like to tell people that they are the party of low taxation. They might have cut income tax in the ’80s, and cut it now from 50p to 45p, but the one thing they have used over and over again is value added tax. Under the Conservatives, VAT has risen from 15% to 17.5% to 20% as it is now. That is the tool they have always used. It is all very well someone being taxed on what they spend or buy, but everybody has to pay VAT, whether they are a struggling pensioner, a student who needs clothes or equipment for university, or a single parent. Everybody has to pay VAT, whether they are a duke or on the bins.

When VAT is put on petrol, it is instantly put up by 3p. The Government’s proposal means absolutely nothing. This Government could show some bravery and leadership by reducing VAT. I know they will say that once VAT has been put on some goods it has to stay, but that does not mean it has to stay at 20%. When the Labour party was in power in 1997, we reduced VAT on fuel bills to 5%. It has been done before; a precedent has been set and it can be done again.

When I look around my constituency I see so many hard-working people who are being squeezed. The most heinous thing, which I hear all the time, is people being demonised because they claim benefits, even though six out of 10 people who claim benefits are in work. That says one thing: work is not paying. What do the Government do? They make a tiny increase this week to the minimum wage. For me, the minimum wage is the cornerstone of welfare reform—a decent living wage. I am sick to death and tired of hearing my constituents be demonised and criminalised because they find themselves unemployed. They are all pushed together in sweeping statements; they are called scroungers, and being from the valleys that hurts me, because I know how proud is the tradition of working. That is the most heinous thing.

One thing the Government could do to prove that we are—to use a phrase that has not been heard for the past two years—“all in this together” is repeal the bedroom tax. That is close to my heart, because the average person in Islwyn will pay an extra £91 for having an extra bedroom. There will be pensioners who have lived in the same council house all their lives, brought up a family and made a home, but who are being kicked out because they have a three-bedroom house. What are they to do—bring in a lodger or someone they do not know? No. In my constituency of Islwyn in Caerphilly county borough, 80% of my constituents who are renting will be affected for the simple reason that in 1945 the Labour Government did not build council houses just to house people: we built family homes. We built two and three-bedroom houses in which families could grow and thrive in a safe environment. That was a cornerstone of Aneurin Bevan’s vision as Housing Minister—a contribution that people often forget.

I am concerned that ordinary people are getting squeezed all the time. The Finance Bill represents an opportunity for the Government to show that they can be caring and compassionate, but this opportunity has been wasted. It was not a steady-as-you-go, as-you-were Budget, and the figures bear out the situation. Growth in this country is anaemic; it is flatlining and needs investment. The Prime Minister’s mantra at Prime Minister’s questions every week is the same: “All Labour wants to do is borrow more money; it wants to go the same way as Greece and spend it all.” To me, however, it is an absolute no-brainer. We are already borrowing £245 billion, so what is wrong with trying to invest that in creating jobs and building new houses?

I oppose the Second Reading of this Bill because it does nothing for the people we seek to represent. This is not about steady-as-you-go; the Government have failed in their primary aim of reducing the deficit, and therefore the Bill does not deserve a Second Reading.

Economic Policy

Chris Evans Excerpts

Monday 25th February 2013 Commons Chamber

[Mr Osborne]

My hon. Friend is right that it is very welcome news from the oil and gas industry, and it is partly because we have been able to provide certainty on decommissioning relief, which it has long sought. One of the challenges for the UK economy is the secular decline in the North sea oil field as it reaches its maturity. Although we will get oil out of it for many more years, we have to look to the post-North sea future, and that is one of the big challenges for the SNP.

[Chris Evans (Islwyn) (Lab/Co-op)]

As a political strategist, does the Chancellor understand that linking the fortunes of the UK economy to discredited credit rating agencies is at best naive and at worst plain stupid?

[Mr Osborne]

That question rather reveals Labour Members’ confusion today. They cannot decide whether this credit rating decision matters or not. What I am saying is that we have to have the credibility to show the world that we can pay our way, and that is precisely what we are doing.

Food Banks (Wales)

Chris Evans Excerpts

Tuesday 12th February 2013 Westminster Hall

[Chris Evans (Islwyn) (Lab/Co-op)]

It is a pleasure to serve under your chairmanship again, Mrs Riordan. I congratulate my hon. Friend the Member for Cardiff West (Kevin Brennan) on securing an important debate.

Sometimes in debates about food banks, or poverty—urban or rural—I get the feeling that Government Members think we make things up or exaggerate them.

[Guto Bebb]

The accusation is not that the Opposition party is making things up, but that it is forgetting history, rewriting it and ignoring its own part in a situation that is desperate for many people in Wales.

[Chris Evans]

The hon. Gentleman has summed up my absolute frustration with the House since I came into this place. All those on the Government Benches seem to want to do is look into the past and blame the Labour Government for everything. I simply ask him to put himself in this position: if tonight someone cannot afford to feed his family, because he finds that he has no food and that his children are screaming for food, will they care whose fault it is? What they care about is where their next meal is coming from. Often in this House, we look more interested in trying to win cheap political points than in bringing about real political change for people who are suffering.

[David T. C. Davies]

Instead of emotion, I am looking forward to something I have not heard so far, which is someone telling us what exactly Labour policy would be. How much extra would a Labour Government borrow? How much extra money would they print? What would they add to the national debt to spend money and resolve the problem?

[Chris Evans]

Were the hon. Gentleman to let me carry on with my speech, rather than intervening in my first couple of minutes, I might have been able to develop that argument. Surely it is a damning indictment of any Government when food banks increase threefold; 22,000 meals were provided by food banks in Gwent in the past year. That is equivalent to a third of the people living in my constituency. Food banks are a damning indictment of Government policies, but they are only a symptom of Government policies.

I had a briefing recently from Caerphilly borough council’s housing department, in which we talked about the effect of the bedroom tax. Single parents whose child is not living with them will not be able to have the child stay over with them. Disabled people will have to leave their homes, even though they have made adjustments, because they have an extra bedroom; otherwise, it will cost them £91 extra, which will have an effect on what they can spend on utilities and food. They are being driven to food banks.

I remember the Welfare Reform Bill going through; everyone was labelled a scrounger just because they were claiming benefits, even though six in 10 people in work are claiming benefits. That is happening an awful lot. We are not talking about the people we might traditionally think of—the ones talked about by my hon. Friend the Member for Newport East (Jessica Morden), such as drug addicts or alcoholics who need food. We are talking about people in work, and that is a damning indictment. Unless there is some change, we are writing off another generation.

I grew up in the ’80s; my father left home when I was 11 and my mother brought me up as a single parent. I could list the things my mother would do with a tin of corned beef to feed us throughout the week; we had corned beef fritters, corned beef stew, and corned beef pie. She even made bread-and-butter pudding out of sandwiches that we had not eaten. Yet she was not faced with the problems that people face now. It is all very well to quote statistics, and it is easy to do that, but what does it mean for children going to school hungry? They are being written off before they even start. They do not have the tools intellectually, because they are too hungry to do school work.

We need to think about radical solutions. Rather than pigeonholing people as benefit scroungers, let us talk about individual need. If I find myself out of work, I have different needs from someone who has not worked for a long time. It is no good the Government saying, “We need to make cuts.” The hon. Member for Monmouth (David T. C. Davies) thinks that we need to make more cuts and that the Government are on the right path— he is nodding away—but if we cut someone’s job, we increase the welfare bill. If we cut the welfare bill through welfare reform, we are putting pressure on charities and others who are helping with handouts. Sooner or later, whether the Government like it or not, someone will have to pick up the bill when the charity has gone under or when the volunteer cannot do the work any more. It will be left to the Government to pick it up.

I would like to have developed the argument further, but someone else wants to speak, so I will give them the last five minutes.

Treasury

Chris Evans Excerpts

Tuesday 18th December 2012 Ministerial Corrections

The following is the answer given by the Exchequer Secretary to the Treasury, the hon. Member for South West Hertfordshire (Mr Gauke), to a question from the hon. Member for Islwyn (Chris Evans) during Treasury Question Time on 26 June 2012.

[Chris Evans (Islwyn) (Lab/Co-op)]

14. What the average waiting time for calls to Her Majesty’s Revenue and Customs helplines was in (a) the last 12 months and (b) the previous 12 months.

[The Exchequer Secretary to the Treasury (Mr David Gauke)]

The average waiting time for a customer calling HMRC’s helplines in the past 12 months was four minutes and 19 seconds. In the preceding 12 months, it was four minutes and 13 seconds.

[Official Report, 26 June 2012, Vol. 547, c. 153.]

An error has been identified in the oral answer given to the hon. Member for Islwyn (Chris Evans).

The correct answer should have been:

Income Tax

Chris Evans Excerpts

Wednesday 28th November 2012 Commons Chamber

[Chris Evans (Islwyn) (Lab/Co-op)]

Let me make it clear that I am not against success. I believe that everyone should be rewarded with the fruit of their labours. However, it is becoming increasingly clear that the Government are in the grip of a failed economic theory—a theory which claims that tax cuts for those at the very top will somehow trickle down through society and that it is possible to go on cutting taxes and spending and that that will have absolutely no consequences.

I am someone who likes to look forward, but I think that in this instance we must look back to the last occasion on which we followed trickle-down economics. When the Thatcher Government followed that policy, they ran deficits in every year except 1988 and 1989. In 1990, we saw record business repossessions, unemployment above 3 million, record mortgage rates and record inflation, and I fear that we are going back there.

Let me tell hon. Members who say that the argument about cutting the top rate of tax is a “left versus right” argument that they are entirely wrong, because it is not a political argument. It is about something quite simple: mathematics. When we take £3 billion out of the economy, we will have to make up that shortfall somewhere, somehow. Judging by what I have heard from the Chancellor so far, I do not think that the Government are very long on detail.

The Chancellor and the Government talk about tax evasion, which has been mentioned today, including by the hon. Member for Dover (Charlie Elphicke), and they talk about going after all those people who avoid taxes. Well, I say this to the Chancellor: “Good luck to you.” Does he honestly believe that the last Government did not go after tax evaders? Does he honestly believe, when faced with people who have created byzantine systems to avoid the taxman, that it will suddenly be possible to close the loopholes? It is simply not going to happen.

People are working harder than they have ever worked before. Some are working 37 hours a week; some are doing two or three jobs just to make ends meet, and what do they see? They see food prices rising all the time. The worst effect is on their families; when they come home from work, they are too tired to involve themselves in their children’s lives. In my constituency, unemployment has risen by 429% in the past year. More people are struggling than ever before, and what do the Government do? They stand back and give tax cuts to the people who are riding in Bentleys and tax increases to those who drive vans for a living.

[John Glen (Salisbury) (Con)]

The hon. Gentleman is making a powerful speech, but if he is so committed to fairness in the tax system, can he tell me why, for 666 weeks under the Labour Government, the higher rate of tax was lower than it is now? How can he possibly stand up and make the case that he is making, given that his party, which was so recently in power, adopted a very different approach?

[Chris Evans]

I congratulate the hon. Gentleman on his factual recall. Yes, the top rate of tax was lower, but—I do not know whether he is aware of this—we experienced something called the financial crash and the rules changed somewhat. That is the truth: things have changed. We live in a different world now, and that should be accepted. My argument, which I shall maintain throughout my speech, is that the people at the bottom are feeling the pain.

The increase in VAT is a tax on the low-paid, because everyone has to pay it; everyone has to buy goods. When I walk down Blackwood high street, I see that every retail business there has been affected by the VAT increase. VAT on food is zero-rated, but the haulier who delivers the food will pass on the increase in VAT on his petrol to the food shop, just as the increased price of cotton is passed on to the clothes shop. Not a single person has been helped. People in this country are suffering, and what do we see? We see a tax cut for those at the very top.

We hear much talk about rebalancing the economy. We are told that the economy is being built, but what this tax cut shows us is an economy that is being built not on people and products, but on perks and promises. That is the wrong message for us to be sending.

[Ben Gummer (Ipswich) (Con)]

I am loth to interrupt the hon. Gentleman, who always speaks with such passion, but I wonder whether he is as angry with the Labour Front Benchers who put their names to the motion and who refuse to promise to restore the 50p tax rate and to cut VAT should they win the election in 2015, as he is with the Government. Surely he should be as cross with his Front Benchers as he is with ours.

[Chris Evans]

I have a lot of admiration for the hon. Gentleman. We served on the Justice Committee together, and I admire the bit of mischief that he is trying to cause me. However, he will be aware that, as I have said before, we do not know what is around the corner. We will make judgments—I am sure that our Front Benchers will make judgments—when we win the next election; and we will win the next election.

I am also struck by the Government’s sheer stupidity. It is all very well to talk about polls and people feeling good about things. When people hear about welfare reform, they support it because it sounds wonderful—66% supported it in the polls—but let us consider housing benefit, for instance. It annoys me that because seven out of eight people who claim it are in work, they are being labelled scroungers. A cap on housing benefit will create ghettoes outside the major cities because people cannot afford to live there and it will make more and more people homeless.

The one thing that the Government need to learn is that someone, somewhere, will have to pick up the bill, whether it is the taxpayer or the hard-pressed charity. We do not live in a consequence-free society. It is not possible to go on cutting taxes and cutting spending without something going wrong. I am deeply concerned, because people out there are crying out for change and the Government are in the way. It is time that we started building a society and an economy in which hard work is rewarded and people can flourish once again.