(12 years, 9 months ago)
Commons ChamberWe have already extracted a price for the European Stability Mechanism treaty that the eurozone wants to put forward by getting ourselves out of the EU bail-out mechanism to which the last Government had committed us. We are working to keep the increase in the EU budget to a real freeze. In other words, we have, I think, proved in office that we can extract important concessions and in the case of the EU bail-out fund we have actually taken a power back to Britain. That will be the approach we take to future discussions and negotiations—putting Britain’s national interest first.
Why did the Chancellor’s statement last Thursday about economic governance in the eurozone fail to mention the most important missing ingredient—a strategy for jobs and growth? Was it an accident or was it deliberate? He has been telling us all summer that Britain is a safe haven, yet growth is weak, unemployment is rising and construction and manufacturing are both contracting. What kind of safe haven is that?
First, may I congratulate the hon. Gentleman on keeping his job in the clear-out of the Labour Treasury Front-Bench team—although on the basis of that question, I am not sure why he did? The whole purpose of our negotiations in Europe and the whole purpose of what we are doing at home is to stabilise the British economy and set it on a path of growth and jobs. We inherited a situation where unemployment had rocketed under the Labour Government and we had the deepest recession of any country in the world, apart from Japan. We are rescuing that situation, and it is reflected in the very low interest rates paid in this country in comparison with all those other countries.
I know that VAT is a somewhat sensitive subject in this place, but has the Minister made an analysis of the costs and benefits and the jobs that would be created by reducing VAT on building refurbishment materials?
It is indeed a very good question. I am, sadly, aware that many costs are associated with such a policy, but I would be very happy to discuss such things with the hon. Lady.
(12 years, 10 months ago)
Commons ChamberI can confirm that we have lost our veto on financial assistance. That was one of the issues with the so-called EFSM—the European financial stabilisation mechanism—which was the EU27 bail-out fund, which we joined a couple of days before this Government were created. Getting us out of it—[Interruption.] The former Chancellor’s memoirs are very clear about this.
The former Chancellor wrote them! What I would say to my hon. Friend is that we did not have the power to veto disbursements from the EFSM, so we had to negotiate our way out of it. That is precisely what the British Prime Minister has done.
(12 years, 10 months ago)
Westminster HallWestminster Hall is an alternative Chamber for MPs to hold debates, named after the adjoining Westminster Hall.
Each debate is chaired by an MP from the Panel of Chairs, rather than the Speaker or Deputy Speaker. A Government Minister will give the final speech, and no votes may be called on the debate topic.
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I pay tribute to my hon. Friend the Member for Rutherglen and Hamilton West (Tom Greatrex), and to the hon. Member for Vale of Glamorgan (Alun Cairns) and other Members, for drawing attention to this exceptionally important and complex issue. It is simply not right that people, many of whom have worked hard on modest incomes and have saved money in what they reasonably thought to be a responsible way, stand to lose significant sums. We welcome the Financial Services Authority’s efforts in securing a compensatory offer from the parties involved, which will be administered through the Capita financial managers, but although up to 70% of the sum invested could be returned to investors via the consumer redress scheme, many will be dissatisfied because the amount falls far short of their original investment.
I want to make five quick points. First, on the unfair constraints on the choices for out-of-pocket investors, there have been reports that the FSA is reluctant to set out a full statement of events surrounding the Arch Cru failure, possibly until after the closure of the redress scheme. I would be grateful if the Minister would agree that that would be an extremely unfortunate state of affairs, as my hon. Friend the Member for Penistone and Stocksbridge (Angela Smith) and the hon. Member for Hexham (Guy Opperman) have indicated. The FSA should either set out its understanding and explanation while the redress scheme is extant, or the scheme’s closing date should be extended to allow the full facts to emerge before investors are forced to decide whether to accept the final settlement. Does the Minister agree that that would be reasonable?
Secondly, can the Minister clarify the potential role of the Financial Services Compensation Scheme? The FSA has been brokering the voluntary settlement scheme, but at what point will the option of claiming anything via the FSCS be made clear to investors?
Thirdly, I want to ask about the lessons to be learnt about Capita and the role of the regulators. Irregular practices clearly took place, and an investigation into the regulator’s handling of the Arch Cru scandal is merited. Hon. Friends are pressing the Minister and the Treasury to look into the behaviour of the regulator, and I would be grateful if the Minister could address that in winding up the debate. Did the regulators check Capita’s capabilities? Compliance work is usually done by banks, but the Arch Cru fund was compliance-managed by Capita and, as we have heard, questions have been asked about the adequacy of Capita’s business resourcing and its internal checking procedures for ensuring the thoroughness of its important responsibilities.
Fourthly, we must have tighter regulation of investment fund descriptions, and there is an urgent need to ensure that consumers are protected from exaggerated marketing terms. For instance, do we need clearer rules about the use of terms such as “cautious fund”? The hon. Member for Hexham highlighted the term “ideal for pension transfer”, which goes to the nub of the marketing mispractice involved. “Guaranteed investment,” “absolute returns” and “balanced funds” are all used frequently in investment schemes, but I am not sure that we have the right regulation of the use of marketing arrangements.
Finally, although we should not underestimate the pain, anger and distress that many people justifiably feel, we must consider the messages that this kind of scandal sends out to the public at large. This situation can serve only to undermine people’s confidence in saving for their future, doing the right thing by planning ahead and putting money aside through pensions and investments. Parliamentarians and the Government must consider not only the impact of the scandal on the people directly affected but its repercussions on people’s trust in financial products more widely.
I thank Members for their inventions and for keeping to time. I ask the Minister now to respond.
(12 years, 10 months ago)
Commons ChamberI do, and for all addicts the hardest thing to do is admit that they have a problem. When this Government came to power in May 2010, we admitted that we had a problem with debt. Even if we fall off the wagon temporarily, we know we have that problem and so we get straight back on it. The Labour party has not even admitted it—it thinks it gave us a golden economic inheritance.
Can the hon. Gentleman tell us by how much unemployment has risen in Rossendale and Darwen in the past 12 months?
I am sure that the hon. Gentleman will provide me with the figures—
It is a pleasure to be able to speak in this debate, but sometimes I listen to Opposition Members and just cannot understand where they have been for the last 10 or 12 years. If my constituents have been listening to some of the Opposition speeches, they will be equally shocked. They will remember a Chancellor who once used to speak of prudence and financial stability creating an economy where the books were balanced. Well, prudence was jettisoned a long time ago and it is certainly not a friend of the new shadow Chancellor. Until Opposition Members understand that they have to have a sensible, balanced economic approach, they will never have credibility with the people of South Staffordshire or, I am sure, the people of this country.
We often hear Opposition Members talk of a lost decade of low growth, low employment and low private sector employment. Well, we had a lost decade—a lost 13 years—in the west midlands between 1997 and 2010. You probably often sit there, Mr Deputy Speaker, wondering how many private sector jobs were created in the west midlands between 1998 and 2008. You were probably thinking it was perhaps 250,000—in those halcyon days, when house prices were booming and the economy was growing—but I am afraid to say that you would be wrong if you thought that. If you thought that the figure was 100,000, I am afraid that you would also be wrong. In fact, there was not a single net private sector job created between 1998 and 2008 in the west midlands. We saw a decline of more than 60,000 private sector jobs in the region.
Can the hon. Gentleman tell us whether unemployment has risen or fallen in his constituency since he was elected?
The hon. Gentleman makes an interesting point. Between September 2010 and September 2011, 74 additional people became unemployed in my constituency. That is a tragic situation, but this Government are doing something about it. Unlike the previous Government, who did little or nothing for my constituency, this Government are delivering. I will explain how. We are out there creating and delivering jobs, and making things happen in South Staffordshire. Already, thanks to the actions of this Government, we have been able to save 400 jobs there by ensuring that the investment was delivered for Moog, an important employer in my constituency, which is relocating to a new factory on the i54 business park.
What is more, this Government are committed to delivering more jobs, not only in my constituency but right across the west midlands. Through the Government’s actions, we have secured an enormous investment of £350 million from Jaguar Land Rover to build a new engine plant on the i54, which has been designated an enterprise zone.
(12 years, 11 months ago)
Commons ChamberLet me start by welcoming the right hon. Gentleman’s support for the report of the Independent Banking Commission. I welcome the fact that he now wants to see it implemented in this country, as I understand it, even if the changes are not implemented abroad. That is a change in his position from April, which I welcome. We all enjoyed his apology for what went wrong. He has another four years of those, I think, before he makes up for the horrendous mistakes that were made.
The right hon. Gentleman was the Minister responsible for the City when Northern Rock totally lost control of its wholesale funding; he was the Minister responsible for the City when RBS launched its takeover of ABN AMRO; he was the Minister responsible for the City when HBOS was making all those unsupportable loans. No one in this House knows more about how to get it wrong than the right hon. Gentleman. He talks about unseemly bickering on the Government Front Bench, yet we have just been reading the memoirs of a former Chancellor of the Exchequer, the right hon. Member for Edinburgh South West (Mr Darling), who is no doubt about to speak. What he reveals about the regime that the shadow Chancellor operated shows that this is the pot calling the kettle black, to put it mildly.
Let me come on to the specific points that the right hon. Gentleman made. First, on the legislation in this Parliament and the draft Financial Services Bill, he is trying to make hay by exploiting a completely false distinction between principle and practice. We support these measures in principle and will put them into practice through detailed legislation. One cannot support all of this in practice because it requires detailed legislation, which even John Vickers says is not for the commission. Let there be no doubt that we support the Banking Commission’s report and that we will legislate in this Parliament. The draft Financial Services Bill might well be a vehicle for implementing some of the changes, but we might also require a separate Bill. That is partly because we need to get the draft Financial Services Bill through the House so that the new regulatory regime, which we are also introducing, is up and running by the beginning of 2013. As I said, I think it is sensible to stick with the proposal put forward by John Vickers that we set ourselves the deadline of legislating in this Parliament.
Secondly, the right hon. Gentleman talked about the international environment. He knows, as many hon. Members do, that there has been a lot of movement on the international front to introduce the new Basel requirements, which are, of course, on the same timetable as the Vickers proposal that the changes should be completed by 2019. Those are sensible changes, but we will argue for other changes that we would like to see at international level, not least the implementation of some of the agreements made under both this Government and the previous one at G20 level, on such things as bankers’ pay and remuneration. We want to see those properly implemented in all regimes. Of course, we hope that other jurisdictions, the Financial Stability Board and others will look at the report, but John Vickers was not asked to produce a regime for the world; he was asked to produce a regime for the UK to reflect the fact that we have 500% banking assets as a proportion of our GDP.
Thirdly, I am afraid that I just do not agree with the right hon. Gentleman on competition, and nor does John Vickers. The right hon. Gentleman says that we should have a Competition Commission inquiry in 2013, but my office has contacted the secretariat of the Banking Commission today to ask it for its view. The commission said that the reason why it chose 2015 is that three vital things that it wants to be operational, including the new challenger bank and the new switching of bank accounts proposals, do not come into effect until 2013. By the way, the latter is a very significant proposal, and I hope that it will get some coverage in the media among all the discussion of investment banking—the proposal is that people can easily switch their current accounts, and their direct debits and so on will follow automatically. However, that does not come into effect until 2013, and the Financial Conduct Authority is not operational till 2013.
The Banking Commission considered that timetable, and it thinks that 2015 is the right year in which to consider whether the changes are working in practice. I agree very much with that—[Interruption.] The shadow Chancellor says “12 months”, but he had 13 years to get these changes right. At the last general election, I remember having a debate with my colleague the Business Secretary and others in this House. The only party arguing against structural change of the banking system was the Labour party, so it is simply ludicrous of the shadow Chancellor to suggest that we are dragging our feet. We are getting on with it. We have produced this report within a year and a half of being in government, and now we are getting on and putting it into practice, so that we do not make the mistakes he made when he was in office.
(12 years, 11 months ago)
Commons ChamberYes, I very much agree with that. As my hon. Friend will know, the need to tackle the enormous economic problems that we inherited from the previous Government, including the enormous budget deficit, was the founding purpose of this Government. It is a purpose that we intend to see through, and he can be reassured that we will stick to our plans.
Given the Government’s poor performance on growth, lower tax receipts and higher welfare spending, will the Chief Secretary repeat—a simple yes or no answer will do—whether the Government are still committed to their target of falling public debt as a percentage of GDP by 2015? Yes or no?
(13 years, 1 month ago)
Commons ChamberI beg to move amendment 13, page 42, line 30, at end insert—
‘(2) The Chancellor of the Exchequer shall review the possibility of incorporating a bank payroll tax within the bank levy and publish a report, within six months of the passing of this Act, on how the additional revenue raised would be invested to create new jobs and tackle unemployment.’.
With this it will be convenient to discuss the following:
Amendment 31, page 42, line 30, at end insert—
‘(2) The Chancellor of the Exchequer shall review the possibility of incorporating a bank financial transaction tax within the bank levy, levied on trading in financial products including stocks, bonds, currencies, commodities, futures and options and publish a report within six months of the passing of this Act, on how the additional revenue raised would be invested to tackle unemployment and reduce poverty in the United Kingdom and to assist in tackling deprivation in the developing world.’.
Government amendments 32 to 50.
We now come to our general debate on taxation in respect of the Finance Bill. Clearly, one of the major omissions from the Bill is a repeat of the bank payroll levy or bonus tax that the previous Labour Administration implemented in 2009. It is not only a matter of fairness that bankers should pay some of their substantial bonuses to support people far less fortunate than them and to rebuild public trust; it makes economic sense too. I hope that our amendment 13 will persuade the Government of the merits of a review of how the bank bonus arrangement could be incorporated into the bank levy. A fair tax on bank bonuses would help to get people off the dole and into work, and it is the best way to get the deficit down and stop Britain’s talent going to waste.
Youth unemployment rose sharply in the recession, as we know, but a year ago it was starting to fall steadily thanks in part to the youth jobs programme and the future jobs fund advocated by the previous Administration. One of the first things that the current Chancellor of the Exchequer did was to scrap that successful programme. Before the election the leader of the Liberal Democrats, now the Deputy Prime Minister, said:
“Parents used to worry about whether their children could get onto the housing ladder, now the concern has spread to whether they can even get a job…We must provide a lifeboat to this lost generation.”
Well, he and the Prime Minister have sunk that lifeboat.
In the 1980s, youth unemployment continued to rise for four years after the recession was over, and whole communities were scarred as a result. Many of the effects can still be seen and felt in places across the country. That is why we believe we need to act urgently to prevent disastrous mistakes from being repeated. There are now 31,000 more young people unemployed than there were last summer, and one in five 16 to 24-year-olds is now out of work. Although there has been a welcome fall in unemployment in the past two months, the claimant count is still rising, vacancies are down and job creation has slowed in the six months since the spending review. Unemployment is set to be 200,000 higher over the coming years than was expected just a few months ago, and the Office for Budget Responsibility keeps revising the figure upwards, just as it keeps revising the growth figures downwards.
We believe that a repeat of the bank bonus tax could be used to create more than 100,000 jobs, build 25,000 affordable homes, rescue construction apprenticeships and of course boost investment in businesses. Putting young people on the dole is not just a waste of talent but a waste of money, and failing to get Britain back to work fast enough is helping to push the benefits bill and welfare costs up by more than £12 billion, or more than £500 a household. It is not rocket science—more young people out of work means more money spent on benefits and less money coming in through tax receipts to pay down the deficit.
Considering how the future jobs fund and the bank bonus levy worked, we believe that sufficient revenue could be raised to invest the money in creating 90,000 good jobs to get young people into work and ensure that we do not make the mistakes of the past. It could also be used to build 25,000 homes to support people as they get back to work. Our plan could generate more than 20,000 jobs in that sector and save several times more jobs in the supply chain and as many as 1,500 construction apprenticeships. That would leave sufficient resources to boost the regional growth fund by £200 million, to support companies that want to start projects that will create more jobs, meaning more help for small businesses in regions up and down our country.
Our amendment is pretty straightforward and, I hope, fairly unobjectionable. It asks the Chancellor of the Exchequer to review the possibility of incorporating a bank payroll tax within the bank levy, and to publish within six months of the passing of the Finance Bill a report on how the additional revenue would be used.
One of the objections that has been raised to reintroducing the bank bonus tax is that it would lead to a flight of talent abroad. We have often been told that a number of people would go from the City to Switzerland, for example. Has my hon. Friend noticed that in 2011, just under 400 of the 330,000 people working in banking and financial services in the City went to Switzerland, and that the year before the number going there fell by 7%?
An excellent statistic from my hon. Friend. We are often told that the reason we cannot take any action is that complex descriptor “regulatory arbitrage”. It is a term that belies what it actually means—people fleeing the country, usually because they want to pay lower taxes. Actually, there are good reasons for the financial services sector to stay and thrive in this country, and they are not just about tax and regulation. They are not always financial reasons. We have Greenwich mean time, and we have a great rule of law that can ensure that businesses succeed and thrive. I believe that that is ample for our financial services sector to be rejuvenated and sustainable. The talk of “regulatory arbitrage” is in many cases the last refuge of the scoundrel.
The Government are letting the banks off the hook. They are taking a light-touch approach on taxing the banks by failing to repeat the banker bonus tax that the previous Labour Government levied, which brought in £3.5 billion.
Is the hon. Gentleman not aware that this Government’s banking levy raises £2.5 billion, compared with the £2.3 billion one-off net yield of the bonus tax that the previous Government levied? The bank levy is a proactive statement by this Government—action that will lead to the raising of more than £10 billion over the course of this Parliament.
The problem is that we should have not either/or, but both. The bank levy and the banker bonus tax would be a fair contribution from the banking sector—[Interruption.] The Minister disagrees, but that is his opinion. The OBR says that the yield of a bonus tax could be £3.5 billion, but even a conservative estimate of, say, £2 billion would mean significant money that could eat into youth unemployment.
I will make my remarks in my own time, but I remind the hon. Gentleman that he and his colleagues stood on a manifesto that rejected the bank levy. It is a bit rich for him now to talk of having both a bank levy and a bonus tax, because at the last election he and his colleagues rejected both ideas.
Let us assume that the Minister is mistaken in his understanding of the Labour manifesto; I certainly would not accuse him of twisting our hope of an international agreement on a bank levy. Many countries are adopting the bank levy idea, and it is often much higher than the one we are pursuing. The Opposition believe that the bank levy is important, and we support it as it is, but—
The question the Minister must answer is this: why is he taking no action at all on banker bonuses, and specifically on repeating the previous Government’s banker bonus? Why does he refuse to do that?
May I just remind the hon. Gentleman what the Labour party said on the bank levy when it was in government? It said that it should be
“coordinated internationally to avoid jeopardizing the UK’s competitiveness”.
The previous Government were not even thinking about a bank levy—they ruled it out. They said that we should not set the tone of the international debate. This Government have had the courage to do so. It is about time that the hon. Gentleman recognised our willingness to take that tough decision to raise more money from the banks than the previous Government raised from their bank payroll tax.
I am sorry that the Minister repeats the point he made earlier. Of course, if the previous Government could have got international agreement writ large on a bank levy, so much the better, but this Government have introduced their bank levy at a puny level. It is a shame that the Minister refuses to repeat the bonus tax on senior executive bankers who take home obscene amounts of money, when that revenue could be used to help to get young people off benefit and into work. It is a shame that he turns his face against that idea. He thinks that the revenue raised by the levy is adequate, but the Opposition do not. We believe that it is necessary for the banks to do more to pay their fair share.
My hon. Friend is right. Does he agree that the Government’s arguments on the levy would be more credible if their corporation tax cuts did not substantially benefit the banks? It would be better if they supported amendment 13.
Indeed. Sometimes Government Members protest too much. The Opposition simply want a review of what the bank levy combined with the bonus tax could yield. My hon. Friend is right about the corporation tax cuts from which the financial sector will benefit. The sector will have a tax cut of £100 million in 2011-12, £200 million in 2012-13, £300 million in 2013-14, and £400 million in 2014-15. That is a £1 billion corporation tax cut over this Parliament. The Treasury ought to supplement its very modest bank levy plan with the bank bonus tax because it is only fair that those who played such a central role in the global economic downturn make a greater contribution to help to secure the economic recovery by supporting jobs and growth.
I agree with the thrust of the hon. Gentleman’s argument—the bankers are getting off far too lightly—but rather than introducing a payroll tax, as he suggests in the amendment, would it not be better to increase the corporate levy? Would that not deal with the bonuses issue?
We discussed in Committee how the bank levy might be altered, and I will come in a moment to my own criticisms of how the Government have framed the bank levy. Their original plans would have brought in far more revenue, but the banks started complaining so the levy was shrunk back to a level that the banks felt was acceptable, not to a level the taxpayer felt was acceptable.
Will my hon. Friend confirm that in order to pay for the corporation tax reduction, which has greatly benefited the banks, the Government withdrew quite a bit of the special funding that had previously been provided for investment in industrial activity? So much for their claim to be promoting British manufacturing! In fact, their taxation policies continue to over-promote the banks.
Indeed, they have imposed stealth tax after stealth tax on ordinary working people and small—and larger—businesses in this country. For some reason—we know not why—they have sought to give help and support to the banks at a time when they ought to be paying their fair share.
I agree with my right hon. Friend—they definitely will benefit from the reduction. I am not sure that the counteracting change—the tweak to the bank levy—goes far enough to counteract that corporation tax change. There are ways in which the bank levy could be amended further, but in general we support the principle; it is the design and the level at which it is set that we object to.
Amendment 31, tabled by my hon. Friend the Member for Hayes and Harlington (John McDonnell), relates to a financial transaction tax, for which a strong and impressive case can be made. Many of us, on both sides of the House, will have received letters and e-mails from constituents through the Robin Hood Tax campaign, which many charities have advocated. I pay tribute to the technical work that they have done on that issue. What may well be very minor changes to transaction levies could, according to many of these designs, generate significant and useful resources. Clearly, though, we need a design that does not jeopardise the rejuvenation of a stable and well-balanced financial services sector, so we would need an honest assessment of the impact of such a tax.
I am appalled that the Government have for now ruled out a financial transaction tax. It should not only stay on the table, but be actively examined and reviewed. Government Members might say that they are pursuing a financial activities tax—a slight variant in this policy area—instead, but the Chancellor, having talked about that last June, has made absolutely no progress with international jurisdictions in advocating or gaining support for it. We see no action by Ministers on what were ultimately G20 discussions about a financial transaction tax. We have not seen them explore either that possibility or a financial activities tax. The only qualm I have with my hon. Friend’s amendment is whether it stresses sufficiently the need for international agreement and discussion. Nevertheless, it is certainly something that, in broad terms, we think needs to stay on the table to be examined further.
That is a crucial point, because moving ahead on this suggestion will take leadership from the very top of all Governments around the world, yet that is the very thing that seems to be lacking in Britain at the moment.
It is a shame that the leadership we need—not just at the G20, but at the European level and elsewhere—on the financial transaction tax and in a number of other areas is lacking. The Chancellor of the Exchequer has not reported any progress on the financial activities tax, for example. Perhaps the Minister would care to tell us today what progress he has made with other Heads of Government and Finance Ministers on the financial activities tax.
Might not the Government’s position have something to do with the fact that the International Monetary Fund does not endorse a financial transaction tax and that there is a stronger case for an activities tax? Should the hon. Gentleman not consider that more fully?
I know that the Government have such a close relationship with the IMF that they take their policy lead from it on almost every issue, but I am sure that they can think for themselves on this issue. Given that there was discussion at the G20 about exploring many of those things, I would have thought that the Government ought to keep the issue on the table and under review because it has potential, as most hon. Members seem to recognise.
Indeed, and there are ways the bank levy could be improved. It might be appropriate at this point to refer to the Government amendments 32 to 50, which are technical amendments. It would be useful if the Minister said whether the bank levy’s yield will be affected by those technical changes. Generally speaking, although the bank levy is a fine idea in theory, the way the Government are implementing it in practice is inadequate. It has been designed around a fixed yield of £2.5 billion to £2.6 billion, but when the Treasury originally published its design for the bank levy last June the banks complained that it would cost them £3.9 billion. The Chancellor listened to their complaints and, as a result, watered down his original plans. Indeed, he gave the banks a £20 billion tax-free allowance before they start paying the bank levy, thus bringing the yield back down to £2.5 billion to £2.6 billion.
Does my hon. Friend agree that the Government’s bank levy was watered down as part of an agreement in their Project Merlin to secure a wider arrangement for lending by the banks into the economy, which we desperately need? Merlin has turned out to be an absolute flop: the first quarter figures for private sector lending to small and medium-sized businesses show that they are £2 billion short already. What a deal!
It is difficult to see how the Government thought that that would be the moment of catharsis—the moment when everybody said, “Yes, aren’t the banks doing their just bit? They’re now completely free from their obligations to the taxpayer.” Project Merlin clearly did not achieve that. The Chancellor made some tweaks to the negotiations on the Project Merlin arrangements—he did so in February, on the day of Treasury questions—and he then tweaked the rate again in the March Budget, after criticisms of the big corporation tax cut that the banks will enjoy. However, the bank levy is set at a relatively low rate, especially when we look at what is happening in France, Hungary, Portugal or Austria. Indeed, we even read in today’s Financial Times about the quasi-bank levy arrangements pursued by the Dutch Government.
In future years, the Government should increase the bank levy to ensure that the banks continue to pay their fair share of tax and so that taxpayers are not left picking up the bill for the crisis caused by the irresponsible actions that the banks pursued. That is why in May we called for the Government to review the bank levy and to publish a report of the analysis behind the rates that they had set and the thresholds that they had chosen. They refused to do that; however, as we have seen, they are now refusing even to review the possibility of repeating the bank bonus tax.
Why has the Chancellor failed to take action on excessive executive banker bonuses? At first, the coalition agreement suggested that the Government might well do something about this. It promised to
“bring forward detailed proposals for robust action to tackle unacceptable bonuses in the financial services sector; in developing these proposals, we will ensure they are effective in reducing risk.”
That is on page 9; it is one of the first things that the coalition put into its agreement. The Business Secretary recently described the bankers’ bonuses paid for this year as “offensive”, yet the Government could not even promote proper transparency on bonuses and remuneration, never mind taking action to ensure that they were fair and reasonable. The most that the Government could extract voluntarily from the banks was an agreement in Project Merlin to report anonymously on the total remuneration of the five highest-paid bank senior executives outside the board. The Government are not even forcing the banks to disclose all the bonuses over £1 million, which was a key recommendation of the Walker review. That would have been easy to implement, given that it was part of Labour’s own legislation. The provision is on the statute book, ready to be triggered.
I cannot answer for the motivations of Ministers. It is difficult to know what motivates them. Is this a question of omissions? Is it incompetence? Is there some other devious motivation, or malice for those who might benefit from the proceeds of these revenues? We do not know, but we look forward to hearing the Minister’s justification for failing to get transparency and failing to repeat the bonus levy.
Recent figures suggest that some of the largest investment banks are actually increasing the slice of their revenues that they pay to their staff. The ratio between remuneration and revenues is known as the compensation ratio, and it is interesting to note from the detailed figures that even the Royal Bank of Scotland’s global banking and markets division paid 34% of its net revenues in remuneration in the first nine months of 2010, compared with just 27% of net revenues in the full year of 2009. The amount of compensation, in the form of salaries and bonuses, is therefore going up as a proportion of revenues. That was also the case for J. P. Morgan, which paid 39% of its net revenues in the first nine months of 2010, compared with 33% in the full year of 2009. Barclays paid 43% of its net revenues compared with 38% over the same periods. Compensations are strong and still growing.
Does my hon. Friend agree that the Orwellian use of the term “compensation” in relation to working for a bank suggests an effort to increase public sympathy for some of the greediest and most stupid business people this country has ever seen?
It is very easy to find oneself tied into the lexicon used by the financial services sector. My right hon. Friend calls a spade a spade, and it is sometimes important to do just that.
The bonuses that I have described are really excessive. For example, we know from the limited disclosures that we have seen that John Varley, the former chief executive of Barclays, received a £2.2 million bonus in 2010 and that, between them, the top five earners at Barclays, excluding executive directors, received more than £38 million in salary and bonuses in 2010 alone. That amount was shared between five individuals. Bob Diamond, the chief executive of Barclays, has received £6.5 million in bonuses for 2010 since January. As many will know, Mr Diamond lost out in the bonanza compared to his two senior managers at Barclays, with Tom Kalaris receiving a cool £10.9 million in salary and bonuses, and the other top manager, Rich Ricci—my hon. Friends might remember his name—receiving a cool £10.6 million. Those two individuals earned enough money—£17 million—in 2010 to pay the wages of more than 500 qualified nurses.
My hon. Friend is pointing out some of the excesses at the top of the financial services sector, but does he agree that it is also a matter of concern to those at the bottom end of the pay scales in the financial services sector to see such inequality in the organisations they work in, just as it is to workers in other sectors?
Indeed. That is precisely why the bonus payroll levy arrangements that we advocated excluded bonuses of up to £25,000 going to those working on the front line in the banks. We thought that those working at that level should not be affected by that particular payroll tax. What we are talking about now are senior executives. Stuart Gulliver, chief executive of HSBC, gained a £5.2 million bonus while Eric Daniels, the former chief executive of Lloyds, secured £1.45 million.
Does it occur to my hon. Friend, as it does to me from time to time, to ask what sort of activity these bankers engage in that can generate such enormous profits? Anybody who has worked in any competitive commercial sector in the UK, let alone the manufacturing sector, operating in the international economy, knows that those sorts of margins and returns cannot be generated in the real world. Are we heading back to the same sort of distortions that led to the previous crash?
There are serious issues about the balance of power between management and ownership. Many shareholders are also very exercised about excessive remuneration, compensation pay or call it what we will, and I believe that the balance of power needs addressing in the longer term. It is interesting to note how banks have tried to shift their remuneration approaches according to the political and tax arrangements of the day. While the Minister will no doubt tell us that bonus payouts for the City in 2010-11 were predicted to come down by 8% in comparison with 2009-10, what he will not tell us is that that apparent fall in bonuses was largely offset by a 7% increase in salaries for senior banking executives. The roundabout continues, but some people never lose out when it comes to this particular game.
Analysis of official earning figures by pay research specialists Income Data Services showed that large payouts in the financial sector during February and March this year helped to maintain payments during the 2011 bonus season at a similarly high level to that recorded in 2010. Not enough has changed; Ministers are not exercised or angry enough about this particular scandal, and action is necessary.
The fact is that banks are now more likely to pay discretionary bonuses, which would be captured by our proposed bonus tax, instead of paying the guaranteed bonuses that they used to get away with—the multi-year contractual bonuses that looked to the rest of us like salaries but that they called bonuses, which would not be caught. If the guaranteed bonuses become the exception and not the rule, as the Chancellor says, it might provide us with an opportunity to capture more of the discretionary bonuses through our bank bonus tax. As I said, we estimate the yield to be £2 billion.
We have to resolve the sense of anger felt by UK taxpayers towards the banking institutions that they had to bail out. The public are still rightly angry about the greed and irresponsibility of some of the senior executives at our largest banks and about the size of the bonuses. There is simmering anger out there still about the bonuses that continue to be paid when austerity is biting very hard for many of our constituents. Real and visible action is needed on bonuses, not secret voluntary arrangements behind closed doors between the big banks—as with Project Merlin, which the Chancellor pursued before. As my hon. Friend the Member for Coventry North West (Mr Robinson) described it, it was little more than a damp squib.
The banks provide an important utility in our society. They are a key part of our economy, and a strong banking sector is in all our interests. However, by talking tough and acting weak the Government are fuelling public anger while doing little to address the issues. They should stop treating people like fools, and do far more to ensure that the banks and senor banking executives are paying back their fair share—a fair share that could generate money to repair some of the damage to jobs and the economy, and help tens of thousands of young people to secure a decent start in employment.
We are not asking very much. We just want a review of whether the bank levy could be augmented with a repeat of the bonus tax. We want the taxpayer to be given a fair deal in return for rescuing the banks, and we want the Government to take seriously the threat of a lost generation of young people struggling to find work. A fair tax on banker bonuses to help people off the dole and into work is the best way to get the deficit down and stop Britain’s talent going to waste.
Amendment 31, which stands in my name, proposes a report reviewing the possibility of incorporating a financial transaction tax within the Government’s proposed bank levy, which would also examine ways in which any funds raised through such a tax could be invested in tackling not just unemployment and poverty in this country, but deprivation in the developing world. Many will remember the financial transaction tax in its former life as the Tobin tax; last year it was relaunched as the Robin Hood tax, focusing largely on the campaign to tackle poverty in the developing world.
I can think of no better day on which to debate this issue, having seen the pictures shown on our television screens last night and today of the tragedy that is taking place in the horn of Africa. This morning, Radio 4 broadcast the story of a family—parents with one child—who had walked for miles to the aid station, only to find that the one-year-old child had died as a result of suffering the drought and famine. I also commend last night’s “Dispatches” programme, presented by Jon Snow, which identified the activities of Rachmanite landlords in west London. Some of those landlords operate in my constituency, and the matter has been raised in the Chamber in the past. It demonstrates the poverty that still exists in this country.
On a personal note, let me say that this morning I received letters from children at Cherry Lane primary school in my constituency as part of their campaign to encourage politicians to think about how we can fund education in the developing world so that children there can go to school. That is what my proposal is all about.
When the transaction tax was relaunched last year as the Robin Hood tax, it was supported by a wide range of churches and religious organisations. I will not name them all, but let me give Members a flavour of them. They included the Trades Union Congress, Crisis, Action Aid, Article 12 in Scotland, Barnardo’s, the Catholic Fund for Overseas Development, Christian Aid, Church Action on Poverty, Comic Relief, the Church of Scotland’s Church and Society Council, the Christian Socialist Movement, the Disability Alliance, the Ecumenical Council for Corporate Responsibility, EveryChild, Family Action, Faith2Share, Friends of the Earth, the General Assembly of Unitarian and Free Christian Churches, Greenpeace, Oxfam, Quaker Peace and Social Witness, Save the Children, Tearfund and the Salvation Army.
That was the largest alliance of civil society organisations that we have seen in generations campaigning on a single issue, and, as you know, Mr Speaker, they came here last month. Twelve hundred people came to Parliament, and met us in Central Hall over a cup of tea. The event was organised in particular by Oxfam, Action Aid, Save the Children, Tearfund, CAFOD and Christian Aid, and their message was simple: 1 billion people have no access to clean water and 2.5 billion lack basic sanitation, and it is time for change and action.
Those organisations pointed out that—as we have seen in the horn of Africa—the situation is dramatically worsening as a result of drought and famine. They raised three issues with us: the need to ensure that all Governments commit themselves to devoting 0.7% of gross national income to aid, the need to tackle tax evasion and avoidance, and—this was their key demand—the need for a Robin Hood transaction tax on banks. The amendment does not ask the Government to make an instant decision; it simply asks them to help us move the debate on. It is an attempt at a bipartisan—or whatever the correct term is as so many parties are represented in the Chamber—or consensual approach to enable us to move forward. I am not asking for its immediate adoption, although I would like that; rather, it specifically asks for a report to be prepared so that we can be convinced about the way forward both in principle and in respect of the practical arrangements, to ensure that whatever Government introduce this tax, it proves to be successful. It simply asks the Government to review and report.
The hon. Gentleman should be patient. I am just warming to my topic. I have much more to say about the bank levy and about amendment 31 on the Robin Hood tax. There is an issue about the need to reform the banking sector and the coalition Government decided to look at the structure of banking, which the previous Government failed to do. We want to tackle issues around the resolvability of banks and to look at how we can make the banking system much more stable. The measures we are taking forward will tackle some of the issues.
It is very gracious of the Minister to give way.
On the so-called progress the Minister is making on banking reform, can he tell us what progress he has made on the transparency of banker bonuses? That is a critical point. How many other Finance Ministers, worldwide or in Europe, has he spoken to and when will the transparency element of the legislation be triggered?
I would like to give way to the hon. Gentleman, but I want to try to wind up the debate because there are other important matters to be discussed this evening.
On Government amendments 32 to 50, since our proceedings in Committee, it has been brought to our attention that in one area the Bill as drafted may not fully achieve the intended policy ambition. These are the rules relating to netting and in particular the rules concerning multi-lateral netting agreements in groups. These are essentially agreements that allow different members of the same banking group to enter into a net settlement agreement with the same counterparties.
We have sought as a public policy objective to ensure that banks should be able to net off certain liabilities against assets, and that the levy is charged only on the remaining balance of liabilities. The amendments clarify the purpose of the Bill and ensure that the netting rules apply so that some banks are not adversely affected. We want to make sure that we keep the provisions under review. That is why we have put into the amendments a power to allow the Treasury to amend the rules applying to netting arrangements.
The hon. Member for Nottingham East asked whether there would be an impact on yield as a consequence of the amendments. There is no impact on yield, as the amendments reflect the policy objective that we have pursued.
In conclusion, we think it is right that banks should make a contribution reflecting the risks they pose to the UK financial system and the wider economy. That is why we introduced the bank levy. We expect the levy to raise more each and every year than the bank payroll tax did under the previous Government. All the Opposition have to offer in the debate is a tax that did not work the first time round. We have put in place a clear strategy to reform the banking sector. I believe that the actions we are taking are right, and I ask my right hon. and hon. Friends to oppose the Opposition amendments.
I repeat my congratulations to my hon. Friend the Member for Hayes and Harlington (John McDonnell) on at least getting the debate on the financial transaction tax on the table. We on the Front Bench also want to keep it on the table. It is appalling that the Government have ruled it out. My hon. Friend and I have already spoken about how we should revisit the issue in future legislative opportunities. The Front-Bench team has a qualm about the fact that the amendment does not mention sufficiently the need for international agreement on the subject, but broadly we agree that the matter needs to be taken forward. Unfortunately, we will not be supporting his amendment on this occasion, but it is an important topic which we must keep under review and keep a close eye on as it develops.
My hon. Friends the Members for Coventry North West (Mr Robinson), for Sefton Central (Bill Esterson) and for Derby North (Chris Williamson) and my right hon. Friend the Member for Holborn and St Pancras (Frank Dobson) highlighted the fact that there is no good reason for the Government’s inaction on bonuses. My right hon. Friend the Member for East Ham (Stephen Timms) and my hon. Friend the Member for Wirral South (Alison McGovern) spoke about the massive blow to the self-esteem that young people in particular feel, and the sense of their role in society and of their value that they lose, if they do not have the opportunity of jobs and employment.
The Minister says that our amendment 13, which would repeat a bank bonus levy, is unnecessary and counterproductive. The Government seem content with the lack of transparency on bonuses. They are happy with high and growing remuneration for executive bankers. They think the banks are paying a fair share, and they scoff at the £2 billion that could be raised by a tax on bank bonuses. We feel that the public disagree with the Government. The amendment would be a fair approach and it would help to create employment. That is why I urge the House to support amendment 13.
Question put, That the amendment be made.
The amendments look reasonably uncontentious. It is sensible to find ways to support mutual assistance between nation states in the recovery of tax debts and duties. I am glad that the consents have come from the devolved Administrations. Those justify the amendments, so we do not wish to oppose them.
May I, too, take this opportunity to congratulate the hon. Gentleman on the prestigious award of tax personality of the year. I am sure that there is more to his personality than tax. Perhaps in his speech, as well as thanking his parents and his agent, he could also thank his accountant.
Amendment 1 agreed to.
Schedule 7
Investment companies
Again, these Government amendments are sensible. It is important that we tighten loopholes for investment companies that might chop and change the election of their functional currencies to generate tax deductible foreign exchange losses and avoid a tax obligation. They seem important minor amendments to improve election arrangements, so we are happy to support them.
Amendment 22 agreed to.
Amendments made: 23, page 166, line 21, leave out subsection (3) and insert—
‘(2A) An election under section 9A(2)(a) may be revoked by notice of the revocation being given to an officer of Revenue and Customs before the election takes effect.
(3) Subject to that, an election has effect until immediately before—
(a) the day on which another election by X takes effect, or
(b) the day on which a revocation event occurs,
(whichever first occurs).’.
Amendment 24, page 166, line 41, at end insert—
‘(5A) Subsections (5B) and (5C) apply if a period of account of X (“the straddling period of account”) begins before, and ends on or after, the day on which—
(a) an election under section 9A(2)(a) takes effect, or
(b) a revocation event occurs.
(5B) It is to be assumed, for the purposes of this Chapter, that the straddling period of account consists of two separate periods of account—
(a) the first beginning with the straddling period of account and ending immediately before that day, and
(b) the second beginning with that day and ending with the straddling period of account,
and X’s profits and losses are to be computed accordingly for the purposes of corporation tax.
(5C) For those purposes, it is to be assumed—
(a) that X prepares its accounts for each of the two periods in the same currency, and otherwise on the same basis, as it prepares its accounts for the straddling period of account, and
(b) that if the accounts for the straddling period of account, in accordance with generally accepted accounting practice, identify a currency as X’s functional currency, the accounts for each of the two periods do likewise.’.
Amendment 25, page 167, line 28, leave out from ‘but’ to end of line 37 and insert ‘for a change in the company’s functional currency (within the meaning of section 17(4) of that Act) as between—
(a) the period of account of the company in which the gain or loss arises, and
(b) a period of account of the company ending in the 12 months immediately preceding that period.”’.
Amendment 26, page 167, line 44, leave out from ‘but’ to end of line 9 on page 168 and insert ‘for a change in the company’s functional currency (within the meaning of section 17(4) of that Act) as between—
(a) the period of account of the company in which the gain or loss arises, and
(b) a period of account of the company ending in the 12 months immediately preceding that period.”’.
Amendment 27, page 168, line 14, at end insert—
‘( ) Where an election made by a company before 27 June 2011 does not specify the day on which it takes effect, the election is to be treated as if it specified the first day of the first period of account of the company beginning after the election was made.’.—(Mr Gauke.)
Schedule 13
Profits of foreign permanent establishments etc
Amendments made: 28, page 209, line 39, leave out from ‘company’ to end of line 40 and insert ‘beginning on or after the relevant day.
(1A) “The relevant day” is the day on which, at the time of the election, the accounting period following that in which the election is made is expected to begin.
(1B) Subsection (1C) applies if an accounting period of the company (“the straddling period”) begins before, and ends on or after, the relevant day.
(1C) It is to be assumed, for the purposes of the Corporation Tax Acts, that the straddling period consists of two separate accounting periods—
(a) the first beginning with the straddling period and ending immediately before the relevant day, and
(b) the second beginning with that day and ending with the straddling period.
(1D) Where for those purposes it is necessary to apportion the profits and losses for the straddling period to different parts of the period, that apportionment is to be made on a just and reasonable basis.’.
Amendment 29, page 209, line 41, leave out from ‘before’ to end of line 42 and insert ‘the relevant day.’.—(Mr Gauke.)
Schedule 19
The bank levy
Amendments made: 32, page 315, line 34, leave out paragraph (b) and insert—
(b) M, or another member of the relevant group, has assets which correspond to liabilities which N, or another entity which is not a member of the group, has to M or (as the case may be) that other member (“N’s liabilities”),’.
Amendment 33, page 315, line 36, leave out ‘between M and N’.
Amendment 34, page 315, line 37, at end insert ‘, and liabilities of other members of the group to N or another entity which is not a member of the group,’.
Amendment 35, page 316, line 1, leave out paragraph (d) and insert—
(d) “the netting event occurs” if the insolvency or bankruptcy of—
(i) M, or another member of the relevant group which has assets which correspond to a liability covered by the provision mentioned in sub-paragraph (1)(c), or
(ii) N, or another entity which is not a member of the group and which has such a liability,
gives rise to the termination of any arrangements under which such a liability arises.’.
Amendment 36, page 316, line 23, leave out ‘M’s assets’ and insert ‘the assets of M, or of another member of the relevant group,’.
Amendment 37, page 316, line 24, at end insert—
‘( ) But if this paragraph applies in relation to more than one member of the relevant group, no part of an asset may be included in the net settlement assets of more than one such member.’.
Amendment 38, page 320, line 11, leave out paragraph (b) and insert—
(b) M, or another entity within sub-paragraph (9), has assets which correspond to liabilities which N, or another entity not within that sub-paragraph, has to M or (as the case may be) to that other entity within that sub-paragraph (“N’s liabilities”),’.
Amendment 39, page 320, line 13, leave out ‘between M and N’.
Amendment 40, page 320, line 14, at end insert ‘, and liabilities of other entities within sub-paragraph (9) to N or another entity which is not within that sub-paragraph,’.
Amendment 41, page 320, line 35, leave out paragraph (e) and insert—
(e) “the netting event occurs” if the insolvency or bankruptcy of—
(i) M, or another entity within sub-paragraph (9) which has assets which correspond to a liability covered by the provision mentioned in sub-paragraph (8)(c), or
(ii) N, or another entity not within sub-paragraph (9) which has such a liability,
gives rise to the termination of any arrangements under which such a liability arises.’.
Amendment 42, page 321, line 6, leave out ‘M’s assets’ and insert ‘the assets of M, or of another entity within sub-paragraph (9),’.
Amendment 43, page 321, line 7, at end insert—
‘( ) But—
(a) if N’s net settlement liabilities include liabilities of a relevant foreign bank covered by paragraph 17(17), X% (as determined at Step 2 in paragraph 24(1)) of the assets corresponding to the liabilities of the relevant foreign bank are to be disregarded for the purposes of sub-paragraph (14), and
(b) if sub-paragraph (12) applies in relation to more than one entity within sub-paragraph (9), no part of an asset may be included in the net settlement assets of more than one such entity.’.
Amendment 44, page 324, line 38, leave out paragraph (b) and insert—
(b) M, or another entity within sub-paragraph (9), has assets which correspond to liabilities which N, or another entity not within that sub-paragraph, has to M or, as the case may be, to that other entity within that sub-paragraph (“N’s liabilities”),’.
Amendment 45, page 324, line 40, leave out ‘between M and N’.
Amendment 46, page 324, line 41, at end insert ‘, and liabilities of other entities within sub-paragraph (9) to N or another entity which is not within that sub-paragraph,’.
Amendment 47, page 325, line 15, leave out paragraph (e) and insert—
(e) “the netting event occurs” if the insolvency or bankruptcy of—
(i) M, or another entity within sub-paragraph (9) which has assets which correspond to a liability covered by the provision mentioned in sub-paragraph (8)(c), or
(ii) N, or another entity not within sub-paragraph (9) which has such a liability,
gives rise to the termination of any arrangements under which such a liability arises.’.
Amendment 48, page 325, line 36, leave out ‘M’s assets’ and insert ‘the assets of M, or of another entity within sub-paragraph (9),’.
Amendment 49, page 325, line 37, at end insert—
‘( ) But—
(a) if N’s net settlement liabilities include liabilities of a relevant foreign bank covered by paragraph 19(17), X% (as determined at Step 2 in paragraph 24(1)) of the assets corresponding to the liabilities of the relevant foreign bank are to be disregarded for the purposes of sub-paragraph (14), and
(b) if sub-paragraph (12) applies in relation to more than one entity within sub-paragraph (9), no part of an asset may be included in the net settlement assets of more than one such entity.’.
Amendment 50, page 336, line 33, at end insert—
‘Netting agreements
(1) The Treasury may by order add to, repeal or otherwise amend any of paragraphs 16, 18(8) to (16), 20(8) to (16), 22 and 25.
(2) An order under this paragraph may make consequential amendments of this Schedule.
(3) An order under this paragraph may have retrospective effect in relation to—
(a) any chargeable period in which the order is made, or
(b) in the case of an order made on or before 31 December 2011, any chargeable period ending on or after 1 January 2011.
(4) Orders under this paragraph are to be made by statutory instrument.
(5) A statutory instrument containing an order under this paragraph may not be made unless a draft has been laid before, and approved by a resolution of, the House of Commons.’.—(Mr Gauke.)
Schedule 25
Mutual assistance for recovery of taxes etc
Amendments made: 2, page 390, line 29, leave out ‘other than excluded matters’.
Amendment 3, page 390, line 31, leave out ‘other than excluded matters’.
Amendment 4, page 390, line 32, leave out sub-paragraphs (3) and (4).
Amendment 5, page 391, line 18, leave out sub-paragraph (4).
Amendment 6, page 393, line 15, at end insert—
(ca) if the foreign claim relates to an agricultural levy and the steps are ones to be taken in or in relation to Scotland, the Commissioners concurrently with the Scottish Ministers;’.
Amendment 7, page 393, line 42, leave out sub-paragraph (2).
Amendment 8, page 395, line 26, leave out sub-paragraph (3).—(Mr Gauke.)
Third Reading
May I join the Minister in congratulating the Bill team on their hard work and unstinting efforts, especially in Committee, where unfortunately I was unable to join them? However, it has been a delight to revisit these issues on Report over the past couple of days. I would like to pay tribute to my right hon. Friend the Member for Delyn (Mr Hanson), whose birthday it is today—I do not know where he is at the moment, but I am sure that he is watching proceedings avidly.
I should also say happy birthday to the NHS and to the official who has been helping the Minister. I am told that 30 is the new 20. I thank my hon. Friend the Member for Bristol East (Kerry McCarthy), and also my hon. Friend the Member for West Ham (Lyn Brown). The Whips are often unsung in these matters, but we would not be here without their support and assistance—and tugging of jackets at various moments! I am not familiar with Bananarama’s greatest hits but the Minister, given his new personality award, might like to tell me a little more about them. I gather that “True Confessions” in 1986 was one of their greatest hits, but “Please Yourself” came in 1993—I think that somewhere between the two defines his approach to the Finance Bill.
Coming in at just under 400 pages, the third Finance Bill of the year, with a huge number of amendments, is a complex measure, but for all its detail and complexity, I am afraid that it represents a missed opportunity to tax the banks fairly and to support job creation across the UK. Those omissions make this a sub-standard and ill-judged Bill. Of course, like every country we need to get the deficit down, but the Government are creating a vicious cycle in our economy because they are cutting too far and too fast—hitting families and costing jobs. More people out of work and on benefits will make it harder to get the deficit down. In fact, the Government are now set to borrow £46 billion more than they had planned.
The Government said they would cut the deficit by cutting spending, but putting people on the dole and suppressing growth is a waste of money and a waste of their potential. Instead, the Government need a plan B. They ought to follow our balanced deficit plan, which puts jobs first. Of course, although we need tough decisions, getting people off the dole and back into work is the best way to reduce the deficit. As we have made clear today, rather than giving the banks a tax cut, the Government should adopt Labour’s plan for a tax on bankers’ bonuses and use the money to fund apprenticeships, getting young people into work and supporting small business.
I am afraid that the Bill jeopardises job creation and fails to support existing jobs. The rushed decision to make a tax raid on North sea oil means that companies are reconsidering their future in Britain, and puts investment and jobs in jeopardy. Of course the Government should seek windfall profits at a time of high fuel prices, but they have rushed that decision without consultation or proper consideration of the longer-term economic consequences. By slashing the investment allowances by £2.6 billion, the Government are penalising those companies that invest, particularly small businesses and businesses in the manufacturing sector. Again, that is putting jobs at risk and holding back growth.
The Bill leaves a number of unresolved and unanswered questions. In Committee, the Government said the child trust fund replacement for looked-after children was still being considered by the Department for Education, but that there was no fixed time frame for implementation. The Minister has been unable to put on record whether any progress has been made on that issue, which is a pity.
Clause 26, which deals with disguised remuneration employment income provided through third parties, has stood out as being particularly badly drafted. It is long and complex, and has been subject to no fewer than 88 last-minute amendments. Businesses are still raising concerns about its scope and interpretation. However, although the drafting of clause 26 was unclear, we did not oppose the principle, and it would be wrong if our position on it were further misrepresented. All we wanted to know was whether the provisions would catch some genuine transactions and whether Ministers were working properly with businesses and professionals to clarify those issues.
The amendments made on Report to clauses 34 and 48 were about closing avoidance loopholes that HMRC have detected. We support those amendments of course, but we have raised concerns about avoidance in respect of the foreign profits clauses. We also had concerns about the loss of tax revenue to developing countries—something on which the Government claim to have conducted only an “initial analysis”. It is a shame that the Government have passed legislation when they cannot give a figure for the impact on developing countries’ tax bases—an assessment that we called for before implementation. We can therefore only hope that the poorest countries in the world are not unintentionally harmed by that measure.
To conclude, as well as leaving a number of questions unanswered and creating uncertainty, the Bill represents a missed opportunity to get banks to pay a fairer share of tax to society, through a stronger bank levy and a repeat of the bank bonus tax. Tragically, it is also a missed opportunity to tackle unemployment and get people into work—further evidence that this Government fail to understand that the best way to secure growth and get the deficit down is to get people off the dole.
I shall make some brief remarks in this Third Reading debate on yet another Finance Bill. Unlike the hon. Member for Nottingham East (Chris Leslie), who is lucky not to have sat through every stage of the Bill, I have endured all of it, from the Budget and Second Reading right the way through to the upstairs and downstairs stages. I too congratulate my hon. Friend the Minister on being named tax personality of the year, which is indeed an exalted position. The tax personality of the year should, of course, know that 5 July is the end of a tax month; in fact, it is also the end of the first quarter of the traditional tax year, so he could have mentioned that too. I can only assume that the judges made their decision before they heard his Bananarama joke. Unfortunately you were absent at that point, Mr Speaker, so you will have to look in Hansard to see what I am talking about.
In the spirit of cross-Chamber harmony, I too briefly congratulate the right hon. Member for Delyn (Mr Hanson) on his birthday. He has also been with us for all stages of the Finance Bill, apart from this one. I can only assume that he has thought of somewhere better than the Chamber of the House of Commons from which to watch the final stage of the Bill.
This is a good opportunity to weigh up the credibility of both the official Opposition and the coalition Government, after all the various stages of the Bill. We have heard many times that the Labour Opposition believe that fiscal tightening and a reduction in the budget deficit are needed. However, although we have heard from many Opposition Members about the cuts that they oppose, we have not heard from any of them about the cuts that they favour. We have also heard about their difficulties with the various tax changes that the coalition Government are making. As my hon. Friend the Minister pointed out, the Opposition pulled a rabbit out of the hat in the middle of our proceedings when the shadow Chancellor announced a great new policy with a flourish. His policy was that the Opposition would, after all, oppose the VAT increase to 20%. However, first the Scottish National party gave the Opposition an opportunity to vote against the increase and they abstained, and then Plaid Cymru gave them another opportunity and they abstained again. Indeed, the Opposition could have given themselves an opportunity to vote against the increase, but they failed to get their amendment in on time. That is two official abstentions and one botched attempt to oppose the Government’s policy, so the next time any Labour MP says that they oppose the rise in VAT, they will not have much credibility.
The Opposition also even opposed tightening a tax avoidance measure in Committee, and this morning the last vestige of Labour credibility—if Labour had any—in dealing with the economy was stripped away by the hon. Member for Nottingham East, when Labour refused to support the extension of special drawing rights arising from Britain’s contribution to the IMF. Of course, that was part of the initiative launched by the former Prime Minister, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), when he supposedly saved the world—I think that was the phrase—at the London G20 summit in 2009. And today, his successor spokespersons for the Labour party refuse to support the spirit of internationalism in dealing with bail-outs around the world.
I hope the hon. Gentleman will allow me to put on record something that he admits has been conspicuous by its absence—namely, the fact that the UK’s subscription to the IMF is rising from, I think, £10.7 billion to more than £20 billion. I hope he will explain that figure to his constituents and tell them, at a time when we are also on the hook for the other European bail-out arrangements, why we should be paying twice in that regard. I would be interested to hear his point of view.
I would be happy to invite the hon. Gentleman, as well as any other hon. Members and my own constituents, to read my blog, where I explained exactly that point straight after this morning’s debate. The explanation is of course a movement between the Government’s reserves and the reserves that we denominate in special drawing rights at the IMF. That does not involve additional Government borrowing or additional cuts, as the hon. Gentleman very well knows. What we saw this morning was the Labour party making a cheap, opportunistic point on a very serious issue.
I am grateful to the hon. Gentleman for being so nice about me just a moment ago. The Minister refused to tell us this morning, but does the hon. Gentleman know how much British taxpayers’ money is on the hook, via our IMF support for Greece? How many pounds sterling are on the hook? Does he know what our liability is?
The hon. Gentleman will have heard exactly what I heard this morning from the Financial Secretary to the Treasury, which was that, in its whole history since 1945, the IMF has never lost its money because it is always the first creditor to be paid. Our money is therefore not at risk, but our providing it is essential in order to ensure that the international economy stabilises. That is also in our own national interest.
I have dealt with the Labour party’s credibility, but what about that of the coalition Government? The points that the hon. Gentleman has just made lead me neatly to compare this country with Greece. During the passage of the Bill, we have seen the sad events in Athens, with the Greek Government having to make difficult and unpopular decisions. Greece’s bond rating, which reflects people’s willingness to lend to it, is CCC, while ours is AAA, even though our budget deficit is much higher than that of Greece. The difference is that our Government have a credible plan for repairing our public finances, and that is what gives us credibility in world markets and at home.
The Finance Bill and the Budget have also confirmed one of the most important measures that the coalition Government will introduce—namely, making the income tax system fairer. That was the No. 1 commitment that my Liberal Democrat colleagues and I stood on in the general election. We believe that work should pay, and that the lowest-paid employees in this country should be shielded from income tax. I am therefore pleased that the Bill takes another step towards making our pledge of £10,000 of tax-free income come true during the lifetime of this Parliament.
The Bill also puts in place a bank levy, so that the bankers will pay something back towards the problems that they helped to create during the last Government’s period in office. The budget is now under control. That is why the coalition Government were formed in the first place. Many of us might have thought at the time that it was a somewhat unlikely coalition, but it was put together to take these difficult decisions, to repair our public finances, to bring back international confidence and to give confidence to our own constituents that our country could get back on track. The difficult decisions have now been made, and we will see the job through.
(13 years, 1 month ago)
Commons ChamberI beg to move, That the clause be read a Second time.
We do not often find the issue of high-cost credit lending in the headlines, but it is critical for many people up and down the country. Many of our constituents would expect to see it addressed in the Finance Bill, because there is growing concern that a large number of some of the poorest people in society are becoming prone to high-charging payday lending, doorstep lending, new variants of hire purchase and illegal loan-sharking, especially as the mainstream banks restrict credit availability.
I gather that since 2007 we have seen a fourfold rise in payday lending. The high-cost credit sector is now estimated to be in the order of £8.5 billion in value. The situation is familiar to many hon. Members across the House and particularly so to my hon. Friends, who represent some of the poorest and most challenged constituencies in the country. In my constituency, Nottingham East, the citizens advice bureaux and other advice organisations, such as Advice Nottingham and the St Ann’s advice centre, have recently published an anthology of modern poverty as they encounter so many stark stories of personal indebtedness daily. There are too many instances of companies—legal ones—preying on the vulnerability and desperation of stressed consumers who need to bridge their spending with short-term but, unfortunately, ultra-high-interest credit. A quarter of consumers who use high-cost credit cannot access any other form of borrowing. Apparently, 7 million people in the UK are denied credit and bank accounts that many of us would take for granted.
May I lend my support to my hon. Friend’s endeavours on this critical issue? Is it not a fact that the pressure on debt advice in our constituencies has increased dramatically because of the economic circumstances and the tightening of the criteria for social fund and care grants, and that this situation will get worse as people get caught up in a spiral of borrowing to pay existing debt?
My right hon. Friend, who has an excellent track record in raising many of these issues, is completely correct. The vice in which many of our poorest constituents find themselves being squeezed is very much apparent. The changes to the social fund that he mentions are part of the context in which we would want to review the circumstances in which high-cost lending takes place. That is the objective of our new clause 11: we want to examine the possibility of regulatory and/or tax measures to address this problem.
The hon. Gentleman mentioned the fourfold increase in payday loans. Would he acknowledge that a substantial amount of that increase occurred in the period 2007 to 2009, at the start of the recession, and that although the rate has subsequently increased, its growth has tapered off somewhat? Does he also agree that payday loans are but a sub-segment of the sub-prime, high-cost credit sector?
Yes, payday lending is indeed a facet of the broader problem. I am not sure about the trends and how things have been moving—the hon. Gentleman may have other statistics that it would be worth sharing if he makes a contribution to this debate—but there is no doubt about the trajectory of that growth, which has been quite marked, which I know is a concern for all Members, in all parts of the House.
Government Members share Opposition Members’ concerns about this issue, and we want to do the best that we can. However, new clause 11 asks for a report on the impact of all tax and non-tax measures on the cost of high-cost lending when we have not yet heard the response to the Government’s call for evidence. I am hopeful, as are many Members, that this will address the issue and provide further help, so does the hon. Gentleman not feel that his new clause might be a little premature?
The hon. Lady makes an interesting point, because it is important that we engage with the Government properly on this agenda. We are still waiting for that report, although I hope that new clause 11 has been framed in such a way as to be pretty harmless and to command widespread support. Ultimately, all that we are looking for is a review of the circumstances; and indeed, some of the tax measures that may need to be included—although they may not—would not currently be part of the arrangements that I understand her hon. Friends are reviewing. New clause 11 is simply about ensuring the widest possible capability for those policy levers that the Government would be able to consider. There are so many measures necessary to help protect the consumer. They include not just action on payday lending or interest rates, for example, but the support needed for financial literacy education—something to which the Government have regrettably taken the axe, by terminating the £26 million financial inclusion fund. That decision is a particular regret, given that it will hit citizens advice bureaux up and down the country, along with other face-to-face advice agencies. Indeed, the financial inclusion fund was an essential bit of seedcorn funding, so I would be grateful for the Minister’s clarification about its future.
There is no need for clarification: if the hon. Gentleman had done his research properly, he would know that the Government have extended the funding for debt advice for a further year, and it is the intention that the Money Advice Service—which is funded by the financial services industry—will take on that work.
I did indeed know of the hon. Gentleman’s announcement of some time ago—not quite a full year yet. We are now into July, and the funding is due to run out next April, expiring at the beginning of the financial year 2012-13. Many advice agencies are quite anxious about what will fill the gap. It is clear that he has kicked the issue to the Money Advice Service, although we do not yet know what its approach will be. One crucial point is whether it will be interested in face-to-face advocacy and supporting such activity.
Does my hon. Friend agree that the Money Advice Service now constitutes an online source of advice for those who have money on where to invest it and does not address the issue of people who are in debt?
My hon. Friend makes an important point. In addition, it does not necessarily address the face-to-face advice that is given by many citizens advice bureaux and other agencies that have been reliant on the financial inclusion fund. The Minister says sotto voce that it will do face-to-face advice as well; I will be interested to see whether the £26 million of investment is maintained. No doubt he will want to clarify that when he addresses the new clause.
I pay tribute to my hon. Friend the Member for Walthamstow (Stella Creasy), whose tenacity is to be commended for the fact that this issue remains front and centre on the political agenda. The Back-Bench motion that was passed last February called on the Government to introduce measures to increase access to affordable credit and to take regulatory action to control non-competitive examples of excessive charging, but we still have not seen any action since then. That is another reason why it is important to move forward and get a sense of priority and urgency into this issue, and this Bill is a good opportunity to consider these matters.
My right hon. Friend the Member for Sheffield, Brightside and Hillsborough (Mr Blunkett) spoke earlier about why some of this action is needed now. The changes to the social fund and crisis loans that were announced in March—after the Back-Bench motion was passed in February—mean that social fund crisis loans will no longer be available to pay for basics such as cookers and beds, and the living expenses rate is being cut from 75% to 60% of the benefit rate, thereby limiting the number of loans that can be applied for. In addition, there is a backlog of unprocessed claims and the Government are planning to cut the discretionary social fund from £872 million last year to just £183 million this financial year—all under the axe of a Liberal Democrat Work and Pensions Minister of State, the hon. Member for Thornbury and Yate (Steve Webb).
At the same time, thousands, if not hundreds of thousands, are being disfranchised from access to credit. After the credit crunch, as the banks recapitalise, we see withdrawal from anything vaguely “sub-prime”, as it may be categorised. However, it is also known that there is money to be made from vulnerable customers. Many hon. Members will have experienced pushy sales calls, which are randomly generated, and text messages, which many people are receiving. It is about the desperate customers that I worry most and their responses to some of those apparent offers of help and assistance. It is all part of the allure of high-cost credit, which we need to regulate far more effectively.
It had been hoped that the promises of mutuality and support for the credit union movement in the coalition agreement would by now have tried to make some inroads into this problem, but despite the promise in the coalition agreement that
“detailed proposals to foster diversity in financial services, promote mutuals and create a more competitive banking industry”
would be brought forward, all we have seen from the Government so far is the Northern Rock trade sale, local authority discretionary help for credit union squeeze because of the cuts to their budgetary position and, of course, the Treasury’s pre-emption of the Lloyds Banking Group disposal. The Vickers commission was looking at how to handle that particular issue, but Ministers have pressed on with the disposal of 620 branches rather than pausing and waiting for that report.
At the same time, funding for advice and financial education is falling away, as we have been discussing, as local authorities cannot pick up the tab. The basic problem is that not all customers are informed and logical when it comes to financial issues. The Money Advice Service, as my hon. Friend the Member for Makerfield (Yvonne Fovargue) mentioned, may well be there as a guide for people who have the time and space to make those decisions, but many of our constituents are not only busy but often confused about financial services. They can be distracted and stressed and in many cases they have an aversion to small print. Coupled with that, there is massive inertia in credit services.
There are some fantastic charities, such as Citizens Advice, which I have mentioned, and the Consumer Credit Counselling Service, of which I was a board trustee for five years. They pursue a number of ways to help those in most distress. Creditor-funded consolidation is a very good approach, but we need other reforms in the sector; facets include, for example, the fee-charging, customer-charging debt management plan providers. Charging customers rather than looking to the creditor to cover the administrative costs is an unacceptable business model in this day and age. The practice should be phased out and I hope the Minister agrees.
I entirely agree. I had a meeting with Wonga the other week. The company advocates a maximum of three rollovers. It is in nobody’s interest, not even the lender’s, to have people in a cycle of debt, because they are less and less able to pay it off. Perhaps something like that could be included in the regulations.
The sector itself ought rapidly to produce suggestions for self-regulation. I hope the new clause will make the sector aware of the seriousness with which the House takes the issue. We have had enough of people in desperate circumstances being exploited. The House of Commons passed a motion in February. We should pass the new clause, simply to ask for a review and a report on the range of regulatory and financial powers that the Government ought to take to stamp out some of the worst practices.
Customers need a fair deal from financial services generally, but our duty is to start with the people who are most at risk—the vulnerable and the exploited. If Parliament cannot stand up today to protect those most in need, who will?
I rise not to support the new clause but to say to Ministers that I would like to hear exactly what they intend to do about doorstep lending. The hon. Member for Solihull (Lorely Burt) mentioned Wonga, which can charge up to 4,500% interest on its loans. Uncle Buck can charge 2,500% and PaydayUK can charge 1,200%. With a base rate of 0.5%, how can charging such inordinate interest be justified? These companies—I call them all loan sharks, to be blunt—travel around our poorest areas. I would be the first to admit that my constituency is not the most deprived in the country, but I have many poor and vulnerable constituents, and I think that Members on both sides of the House are concerned about what action we should take.
I know that Ministers are not keen on dealing with this problem through regulation, but perhaps we should consider our approach to smoking: we do not stop people smoking—although we have banned it in public places—but we put large health warnings on cigarette packets. The Financial Services Authority, or whichever body will be responsible, should at the very least take action so that there are serious health warnings for those considering taking out these loans.
Her Majesty’s Treasury and BIS have joint responsibility for this matter, which is why we issued a joint call for evidence. As I said, the consultation includes gathering further thoughts on the five areas from the OFT review.
The Government will respond to the review in the coming weeks and we are still assessing the evidence that has been provided. I can tell the House that a number of responses have been received on introducing a cap on interest rates, including from Members of this House. This is clearly an area that we will consider properly and carefully. We have been clear that we are not afraid to take action where there is evidence of consumer detriment.
I turn to the new clause that was tabled by the shadow Chancellor and a number of hon. Members. It asks the Government to review the impact of all taxation measures on lenders who are seen to engage in high-cost lending. I appreciate that this may be a probing new clause. I pointed out in Committee that the new clause as then drafted would lead to the perverse outcome of forcing up the cost of credit. The new clause before us has similar defects and unintended consequences.
I will point out the defects first. It is the Office of Fair Trading that regulates consumer credit, not the FSA. I would have thought that a Member who is so proud of her reputation for doing the homework would have got that right. It is well known that the OFT regulates high-cost credit.
Secondly, unlike the new clause tabled in Committee, which focused on the bank levy, this new clause looks at tax measures that are applicable to high-cost credit lenders. It would require each tax measure in the Budget to be assessed to see whether it is applicable. I listened carefully to the speeches of the hon. Members for Nottingham East and for Walthamstow—she is probably tweeting about this as we speak—to find out what tax measures they had in mind. I did not hear a single tax proposal being put forward by Opposition Members. [Interruption.] The hon. Gentleman says that we should propose the measures. I have been listening carefully for any sensible tax proposals from Opposition Members, but I am yet to hear one.
My concern is that there is a degree of price elasticity for those who use high-cost credit. Such people pay for high rates on their borrowing. If we increased taxes on high-cost credit, the costs would be borne by the borrowers through higher charges and the benefit would be gained by the Exchequer. That would run counter to the interests of those who use high-cost credit.
If taxes and levies are invariably passed on to the consumer, will the Minister elaborate on the banking levy? Presumably he feels that that, too, will be passed straight through to the consumer. Are there not other tax measures that disincentivise or demerit activities?
There are a number of taxes that disincentivise certain activities. We could be here all day identifying them. The challenge is to what extent an increase in tax is passed on to the consumer and to what extent it is borne by the shareholders. There is a lot of evidence that in areas where borrowers are relatively insensitive to price, such as payday lending, the additional costs of tax measures would be passed on to the consumer. I am yet to be persuaded that that would not be the case. It might help if the Opposition had some concrete proposals on tax that could be assessed, but so far they have not. Perhaps the hon. Member for Walthamstow has a proposal.
Yes, my hon. Friend is absolutely right. The provision of better education, information and guidance to help people manage their money is extremely valuable. That is why we have been very supportive of the Money Advice Service in its work to help improve financial capability and capacity.
Sustainable solutions to the issues raised by the Opposition are not simple or obvious. As my hon. Friend the Member for North Swindon (Justin Tomlinson) said, an individual making the minimum repayment on their credit card could be subject to a higher total cost of credit than someone using payday lenders. The vast majority of people who borrow from payday lenders and then re-borrow pay off the amount that they borrowed by the third time. That shows that careful and considered thought needs to be given to the impact on consumers of a cap on the total cost of credit, and how it would be implemented in practice. The majority of available research focuses on interest rate restrictions rather than such a cap, but some of the same challenges apply.
We need to gather evidence before we introduce new rules, or else risk unintended consequences. That was why we launched the consumer credit and personal insolvency review, and we are considering carefully the evidence that has been provided. The Government will announce the next stage shortly, and are committed to taking action when we can be sure that it will be effective. The Under-Secretary of State for Business, Innovation and Skills, my hon. Friend the Member for Kingston and Surbiton (Mr Davey), and I will continue to engage in the matter, along with the hon. Member for Walthamstow. However, I am afraid the new clause is not the right way to take things forward. It is flawed in both detail and effect. We need sensible, well-thought-through interventions to improve the functioning of high-cost credit markets and get better outcomes for consumers. The new clause would not achieve that, and I ask the Opposition to withdraw it.
I know that it cannot be easy for the Opposition to work with the Government on this issue and appear to concede on the new clause. It could seem like a climbdown for them to accept that more work is needed before action is taken, but that is the sensible, responsible approach.
I am sorry that the Financial Secretary has taken that attitude to the new clause, which is pretty innocuous in calling for a review. We have not put specific proposals in it, because we thought that in the spirit of cross-party working it would be useful to set up provisions to allow the Treasury and the OFT, working together in harmony, to work through the options and possible policy devices. Asking for a review on an extremely serious issue such as this is a bit like motherhood and apple pie; it really should not be objected to.
Will the hon. Gentleman acknowledge that a review is already under way, and that all these issues are being considered as we speak? The new clause would serve only to delay the outcome of that review.
I must correct the hon. Lady. I know that there is a review of sorts going on, but it relates to credit card lending and high bank charges on lending. The letter that my hon. Friend the Member for Walthamstow (Stella Creasy) received in May from the Under-Secretary said that the high-cost credit market
“was not specifically included in the call for evidence”
for the current review. That was what the letter of 25 May said—from the same Minister, incidentally, who refused to meet my hon. Friend.
The Financial Secretary is far too relaxed about this issue, and the Government are not exercised enough about it.
Members of all parties, including the hon. Gentleman, to whom I may give way in a moment, have made the point that there is great concern among our constituents in our surgeries about the real suffering and punitive charges that they sometimes face. The organisations in question admittedly engage in legal lending, but their activity feels immoral to many of us.
My hon. Friend the Member for Makerfield (Yvonne Fovargue) said that help from the financial inclusion fund ought to be there for our constituents. The Minister tried to explain that that fund will remain for another nine months, but as my hon. Friend said, it will end, and for those who struggle even to open the envelopes containing the bills as they stack up, there is no substitute for such face-to-face advice. The Government need to do better to ensure that face-to-face advice services remain and do not fall away when the cuts to them are compounded by local authority cuts.
(13 years, 1 month ago)
Commons ChamberMy hon. Friend the Member for Gainsborough (Mr Leigh) kindly moved it in my stead.
Is it fair—
On a point of order, Mr Deputy Speaker. I do not wish in any way to dispute the hon. Lady’s version of events, but I am quite sure that I distinctly heard her—maybe the official record will show this—say “not moved” when she was asked about new clause 5. Am I wrong in my recollection of that?
That is not a matter for the Chair, but I am sure that the hon. Gentleman will be able to read Hansard and work it out for himself tomorrow. As a matter of record, as he knows, it is open to any Member to move a new clause, despite the fact that the Member who tabled it has decided not to move it.
Is it fair that when incomes are equivalised, one-earner married couples with children, on the average male wage, find themselves thrust into the poorer half of the population in income?
I apologise for interrupting the hon. Lady’s flow, but this is really quite important. Did she or did she not say “not moved” at the beginning of the debate on new clause 5?
I have already indicated that my hon. Friend the Member for Gainsborough kindly moved the new clause in my stead. I am very pleased that he did so.
I will give way in a minute.
In comparison, a household with two people earning between £35,000 and £40,000 each, which has a much higher income, will keep its child benefit. That is not fair. In response to correspondence, the Minister has said that there has to be a bit of rough justice and that to introduce a system of transferability of allowances and entitlements would be very complicated. However, that is exactly what was proposed by the Prime Minister with the transferability of tax allowances, and that is what is proposed in the new clause. That is of significance, because there is a read-across from this other thorny policy issue that faces the Government.
I hope that we will have a positive response from the Minister, and that he will spell out in detail when and how the Prime Minister’s pledges to the country will be implemented.
What on earth is going on with the Tories this evening? It is a perplexing situation, because Conservative Members usually accuse Labour Members of filibustering in an open-ended Finance Bill debate, but not at all this evening. Instead we seem to have a private family dispute breaking out.
There could be, who knows? We had the unedifying spectacle, at the beginning of the debate, of the hon. Member for Congleton (Fiona Bruce), in whose name the new clause was tabled, not moving it, and the hon. Member for Gainsborough (Mr Leigh) swiftly getting to his feet and deciding to move it. Three hours later, here we are. I am not quite sure whether the hon. Member for Congleton had reached some sort of deal with the Whips—it did not look like a particularly friendly deal at the time, but maybe she had a concession from Ministers and they are going to announce, finally, some movement on their election pledges. It is all very strange behaviour.
As my hon. Friends have said, it is very peculiar, at a time when millions of families, pensioners and others are being hit hard by deep spending cuts and tax rises, that the first priority of so many Conservative Members is to advocate an unfair tax cut with no apparent benefit to society. It would be a multi-billion-pound marriage tax break that would penalise those who are separated, widowed or divorced, many of whom are already being hit hard by cuts to tax credits and child care.
On the subject of unfairness, would the hon. Gentleman like to apologise for the fact that in the financial year 2007-08, under his party’s Government, the tax burden on one-earner married couples with two children, on the average wage, rose to 44% greater than the OECD average? That is a matter of fairness. Does he think any responsible party should ignore it?
I am not quite sure what the hon. Gentleman’s point is. Maybe in the cool light of day that intervention will have more light shed on it. In his contribution earlier, he asserted that there was a causal link between marriage and the socio-economic well-being of society, child well-being and so forth. He may well have a set of statistics in which he sees a correlation, but I am sure he understands the difference between causal and correlative effect. It may well be that car ownership has a similar correlation with child well-being, but that does not mean that setting up the tax system to the advantage of a particular institution will necessarily have the outcome that he seeks.
My hon. Friends the Members for Stretford and Urmston (Kate Green), for North Durham (Mr Jones) and others have overwhelmingly proved that we need a tax and benefits system focused on need and on poverty alleviation, particularly poverty among children. That must be the driving force behind a sane and rational tax system. We do not want a system with the peculiarities and idiosyncrasies that Conservative Members advocate.
Does my hon. Friend agree that one causal link might be with poverty? The hon. Member for Christchurch (Mr Chope) says that couples in Dorset stay together longer, but might that not have a lot to do with the affluent nature of that part of the world compared with, say, inner-city Glasgow?
Absolutely. Of course that is the case. It is so obvious that it is surprising that Conservative Members cannot see it. What is worse is that the new clause that they have moved—or rather, that one of them has moved—would cost more than £4 billion. It would cost £4.1 billion to create a personal allowance transferable between all couples, married and unmarried. That would be the price tag of new clause 5. That is the equivalent of a penny on income tax, a penny on employee national insurance rates, a 1% increase in VAT or putting VAT on fuel and power, as we know the Government sometimes like to do. If Conservative Members advocate spending that amount of money, surely it would be better to target it on the basis of need and where it would have the best and most direct benefit to society.
There is a long history of the transferability of personal allowances, and I will not go through it.
I know that many of my hon. Friends would like to me to elucidate some of that history, but we have already been through various centuries in this evening’s debate. Suffice it to say that it was a Conservative Government who eventually phased out the married couple’s allowance, and indeed the current Lord Chancellor who said:
“Now that husbands and wives are taxed independently—one of the best taxation reforms in recent years—the married couple’s allowance is a bit of an anomaly.”—[Official Report, 30 November 1993; Vol. 233, c. 935.]
My hon. Friend the Member for Stretford and Urmston was absolutely right when she highlighted Labour’s policy shift towards helping the children and families in greatest need, particularly through the tax credit system. That was one of the greatest changes made by the previous Labour Government, and one that we should be proudest of.
The hon. Gentleman could have speeded that up by not intervening.
I shall finish by saying that, clearly, there are major problems with the transferable allowance. It is costly and not targeted, and it is unfair to those without a marriage certificate, whether they are divorced, widowed, single or in a couple. There are a host of anomalies and unintended consequences, as several of my hon. Friends have said. For instance, if a husband is killed in a tragic road accident, his widow and children will be left without support, and so on. The proposal undermines the principle of independent taxation, but most of all, we should focus our tax and benefits system on need and on the alleviation of poverty. I sincerely hope that the House will reject new clause 5.
As we have heard, new clause 5 would introduce transferable personal allowances for married couples, allowing one spouse in all married couples to transfer unused personal allowance to the other. I am very grateful to my hon. Friend the Member for Congleton (Fiona Bruce) for tabling the new clause. It highlights an important point: that marriage is a positive institution, and one that the Government are committed to support.
We are keen to send a clear message that family and marriage matters, and that strong and healthy families help to create a strong and healthy society. In little more than a year, this Government have proved our determination to tackle the wider issues that can affect family stability.
(13 years, 2 months ago)
Commons ChamberUrgent Questions are proposed each morning by backbench MPs, and up to two may be selected each day by the Speaker. Chosen Urgent Questions are announced 30 minutes before Parliament sits each day.
Each Urgent Question requires a Government Minister to give a response on the debate topic.
This information is provided by Parallel Parliament and does not comprise part of the offical record
My right hon. Friend highlights the need for private sector involvement, and he will know that Chancellor Merkel and President Sarkozy agreed this weekend that there should be voluntary and private sector involvement in resolving the Greek debt. Some very strong accountability is attached to any future financial support for the Greek economy: a tough programme of privatisation, and structural reforms to improve its competitiveness. I emphasise to my right hon. Friend that although it is right that there should be private sector involvement, it is not in our interests for there to be huge turmoil in our largest trading partner, the European Union.
Clearly, it is vital and in all our interests that sustainable resolutions are agreed for Greek debt financing, but surely the Government must recognise that there needs to be a smarter approach than simply piling more and more austerity on Greece. What is the Financial Secretary’s response to those, including Boris Johnson, who said yesterday that
“austerity measures are making the economy worse”
in Greece?
Why does the Financial Secretary allow the EU to procrastinate continually and to kick a solution on the bail-out mechanism into the distance repeatedly? He says that the EFSM has not yet been used. The European Council meets at the end of this week. Will the Government ensure that they grasp the nettle this time, and make sure that a permanent eurozone-only bail-out mechanism comes into force as soon as possible rather than pushing it back again? Will he give assurances that the UK will attend any future meetings, which could involve the use of EFSM, even if they are eurozone Finance Minister meetings, because the UK’s empty-chair policy clearly is not working?
Given that the Financial Secretary tabled a little-noticed Commons motion last week to double the UK’s subscription to the IMF from £10.5 billion to £19.7 billion, was not the Foreign Secretary being disingenuous when he said on “Sky News” earlier that
“any such support for Greece is for the eurozone and for the IMF, not for the UK”?
Britain will end up paying more for the Greek bail-out via the IMF, so will the Financial Secretary come clean and say what he estimates our share of IMF bail-out costs will be for our taxpayers? Surely Ministers should pull their fingers out and ensure that the EU makes some final decisions on all that. Is not it about time that the Government showed some leadership?
The hon. Gentleman continues to amaze me with his remarks. He seems to forget the role that his Government played in setting up the EFSM. The Conservative party has delivered a commitment to ensure that it is replaced with a permanent mechanism—one matter that will be discussed at the European Council later this week.
It is clear that we do not want to be part of a bail-out of the Greek economy and that we do not want the EFSM to be used. The fact that we are outside the Eurogroup sends a clear signal that it does not expect us to participate in that bail-out. Of course, Madame Lagarde, the French Finance Minister, made it clear last month when she appeared on “Newsnight” that she thought that the resolution for Greece was a matter for the eurozone only.
The hon. Gentleman mentioned the increase in the IMF commitment. Of course, the former Prime Minister, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), committed to doubling the resources available for the IMF at the April 2009 G20 summit in this country. I am surprised that hon. Members have such short memories of those matters.