(7 years, 1 month ago)
Commons ChamberThank you, Mr Speaker. I want to press the Secretary of State a little on the point that the right hon. Member for Harlow (Robert Halfon)—the new Chair of the Select Committee on Education—and some of my hon. Friends have mentioned: where in the Department is the money coming from? It sounds as though the Secretary of State will be robbing Peter to pay Paul from within central programmes. Will she set out a bit more clearly which of these central programmes will be cut: the teaching and leadership college, the standards agency, the mentoring programme, the longer school day programme, the 16-19 budget, university technical colleges or the apprenticeships programme? Or is she promising not to cut any of them?
It is important to look across the piece to gain additional efficiencies from the Department. The hon. Gentleman talks about cuts, but the reality is that we have to take every single pound of taxpayers’ money and get the most out of it. It has struck me how many different pots of money there are across the Department, and we have to make them work more strategically. In doing so, we can unlock funding that can go directly to the front line of schools.
(13 years, 3 months ago)
Commons ChamberMy right hon. Friend says that that is fine, but there is a danger for our country that even that would have an impact on the tax planning that we could undertake with corporations as member states choose whether to opt in or out. We want to ensure that we are in those discussions at this earlier stage, before we get to that part of any future process. We do not know whether we will get to that stage—many member states might share our concerns—but we absolutely need to be in there now, making our case, because we do not want to end up with a smaller group of member states going down that route, which could, depending on their decisions on tax loopholes and avoidance, which are complex, lead to negative unforeseen consequences for the UK tax system’s competitiveness, which might happen even if the UK were outside any possible future proposals.
That was a lucid explanation—irony, of course, sometimes does not work in Hansard. The right hon. Member for Wokingham (Mr Redwood) has hit the nail on the head. Why does the motion not say no to the consolidated corporate tax base proposal?
At the moment, there is no proposal on the table. A proposal is being worked up, but things are at an early stage. Member states have had, I believe, two working group meetings with the Commission to talk about how any proposal might operate. Fundamental questions are still being developed on, for example, how the formula will work, and a host of other issues. As I have said, part of the challenge is how any avoidance loopholes might work in practice, and whether they would be substantial. We are at a very early point in the process. Today’s debate allows Members of our Parliament to have their say, which we can then add to the Commission’s process.
Yes, I agree with the right hon. Gentleman on that. We need to begin to readdress entirely the accountability deficit. I know that this Parliament already tries valiantly to address it—in Scrutiny Committees and elsewhere—but this is a debate about serious proposals. The Treasury is often an intermediary these days when it comes to new regulations and policy changes. It is important that we should think about the design of our Government and our Parliament in tackling proposals as they come along.
As I said, I am interested in the Government’s line. We will not take issue with them on this proposal this evening, but we want to watch where they go with it. All I am asking of the Minister is whether coalition policy is taking into account the Liberal Democrat official line.
We are one Government and this is a Government motion. The hon. Gentleman can take it from the motion that it has the support of the coalition Government, who include two parties.
That is very helpful, and it means that the Liberal Democrats must have undergone a de facto change of opinion. I suppose that we can ask the Liberal Democrats. [Interruption.] The hon. Lady says, “Ask them,” but we cannot. Anyway, I do not want to intrude on private grief, one Government or not—although probably not—and neither do I want to take up too much more of the House’s time.
The hon. Lady has said that she is anxious that, if we are not careful, a smaller group of states might just go ahead with the enhanced co-operation procedure in any case. What assessment has been made of the potential impact on UK businesses, tax revenues and so forth? Which other member states does she think are most likely to go ahead? What role could we play in ensuring that we are not sidelined or excluded from those discussions, but instead have an impact on them?
Those are the key points that we need to address right now. I am generally worried about the Government’s disengagement from those European issues that really matter to this country. As we know, the Minister has a habit of signing Treasury memorandums about European matters that are perhaps not always agreed to by others in her party. I am referring to the European stability mechanism documentation that she signed, when she agreed that cross-party consensus was gained between the previous Government and her Administration. We will obviously be debating that on another occasion, but, for the time being, we will be keeping a watching brief on where the Government stand on this matter.
(13 years, 5 months ago)
Commons ChamberI will not, if my hon. Friend will allow me, because I want to focus on what the OBR needs to take account of.
I have been listening to the hon. Gentleman for a while, but I want to draw his attention to the OBR’s economic and fiscal outlook, which was published in November last year. I do not know whether he has looked at that, because it contains 50 pages that consider the forecasting issues about which Opposition Members are raising concerns. I thought I would mention that because I get the impression from what he is saying that he has not read it.
Quite the contrary. Perhaps that was published in the free phase when the OBR, untrammelled by legislation and existing in the ether, as it currently does—we are post-hoc legislating now—had its moment of freedom when it could comment on such things. If the Bill locks the OBR into a narrow band of responsibilities and duties, it is reasonable to worry that it will be limited to commenting on a certain number of aspects. I accept absolutely that, as the Minister says, fiscal policy is affected by growth, and that therefore the OBR has an implicit right to comment, but that has not been made clear enough, which is a sign that she still does not understand the centrality of growth and employment policy to what the Treasury should be pursuing.
I do remember the motion to which my hon. Friend refers. We were trying to be very clear, as he will be aware, and no doubt deeply unhappy, that some aspects of our fiscal and taxation system—for example, VAT—are set in relation to a broader pan-European directive. As we have discovered, that is one reason why the Opposition’s policy on reducing VAT on fuel alone is simply illegal, and I hope I can reassure him that we were trying to be very clear that it is primarily the UK Parliament that takes those decisions.
Perhaps I can reassure the rest of the House that growth is already an integral part of this Government’s approach to turning around our country’s public finances and economic fortunes. I understand why the amendments have been tabled, but they are unnecessary.
I am grateful to the Minister for her generosity in at least admitting that our debate and amendments will be of interest to the Office for Budget Responsibility. Indeed, I hope that is the case. We have tried our best on many occasions, and my hon. Friends the Members for Bassetlaw (John Mann), for Swansea West (Geraint Davies), for Edinburgh South (Ian Murray) and for Islwyn (Chris Evans) in particular have in plain terms tried to impress upon the Treasury Minister our anxiety that the Chancellor, in his blinkered obsession with hasty deficit reduction, risks harming the wider society and economy, particularly when it comes to jobs and economic growth. We have said that on several occasions, and it was important to reiterate the point today.
I understand, however, that the Minister has explained that the implied terms of the Bill do, indeed, allow for the OBR to focus on economic growth and employment matters. The Opposition hope that the OBR, at least, will do so, even if there is a deficiency in the Government’s strategy on the matter. We will no doubt debate those questions more, in terms of substantive policies, over the coming days.
The Opposition feel that fiscal policy cannot be looked at in isolation from economic growth, because the two are inextricably linked, and we will continue to make that point, even if Ministers seek to separate them. For the time being, however, I do not feel it appropriate to push the amendment to a vote, so I am happy to withdraw it. I think the Minister has heard the point. My hon. Friend the Member for Bassetlaw has accused me of tabling pro-Government amendments, and for that reason alone I should take them off the Table, given that we have other matters that the House will want to consider on Report. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 2
Annual Budget documents
On amendment 2, the Government are committed to increasing transparency in public life. That transparency is essential to good fiscal policy, as the hon. Member for Dundee East (Stewart Hosie) said. In fact, the Government already provide the costing methods and assumptions for policy proposals. Those were made available in policy costings documents at the last Budget and spending review, and copies were made available to the House. That is a step change in transparency in fiscal policy making. Specifically in relation to the OBR, the additional transparency referred to in the amendment is already required by the statutory charter for budget responsibility, which says at paragraph 3.9:
“The Budget Report shall provide, at a minimum: an explanation and costing of the impact of all significant fiscal policy measures introduced by the Government since the last Budget and an explanation of the methodology used to cost the fiscal impact of each of those measures”.
In relation to the Bill, I draw the hon. Gentleman’s attention to clause 4(6), which explicitly refers to the OBR’s reports being clear in explaining the factors that it took into account when preparing the report—not only the assumptions that he mentioned but the main risks that it considered to be relevant. So there is a safeguard not only in the charter but in the Bill to ensure that there is transparency about how the official forecasts have been arrived at.
On amendment 6, the OBR is accountable to Parliament in order to enhance Parliament’s ability to hold the Government to account for fiscal policy. The OBR’s forecasts and analysis will be laid directly before the House. The budget responsibility committee will be appointed with the consent of the Treasury Committee, and will be available for scrutiny. There will be separate reporting to Parliament of the OBR’s expenditure, and, as many Members have already discovered, relevant written questions will be answered by the OBR. The OBR is also accountable to the Chancellor, reflecting its role in producing the official forecast, which will form the basis of the Chancellor’s Budget decisions.
Herein lies the challenge to Labour Members. The OBR will provide the Government with timely access to the information necessary to reach policy decisions ahead of fiscal policy events. The Treasury Committee recognised that in its report last year, when it said:
“Involvement In the Budget process necessarily involves close contact between the Treasury and the OBR”.
Close working also means that the OBR has access to all Government information to ensure that its conclusions reflect the most accurate and up-to-date information. It is therefore right that the OBR provides the Government with pre-release access to its forecast in order to ensure the accuracy of both it and the Budget documents, which are published simultaneously.
It is also right that there is transparency in the approach to the sharing of information. The OBR has chosen to follow the well-established pre-release practices put in place by the Office for National Statistics. I can assure the House that this arrangement does not compromise the OBR’s independence. It is an approach that has worked well for the ONS. The OBR has been transparent about when reports have been shared. It confirmed in its November “Economic and fiscal outlook”:
“We have come under no pressure from ministers, advisers or officials to change any of our conclusions.”
The OBR’s access to Government information distinguishes it from other UK forecasting organisations, and ensures that the Chancellor and Parliament are provided with the most up-to-date information regarding the latest UK economy and public finance figures.
I understand the rationale behind amendment 6. However, given the practicalities of the OBR’s accountability to the Chancellor and its role in producing the official forecasts, we feel that it is better for it to act on its own decision to follow the ONS pre-release guidelines. I will resist both amendments.
I am getting used to the hon. Lady’s resistance to our amendments. One day we will persuade her to accept even the smallest, most generous Opposition amendment, but perhaps not to this Bill.
I understand the points that the hon. Lady made about amendment 2 and costings. I know that there have been attempts to broaden access. If and when we hit obstacles or refusal to publish, we will come back to her to try to get more information into the public domain. However, I accept that she is committed to a particular direction of travel, so we shall not press the amendment.
On amendment 6, the Minister seems to understand that several members of the Public Bill Committee might have hoped for an Office for Budget Responsibility that looked more akin to the Congressional Budget Office or a parliamentary budget office, and was a little bit closer to the legislature and less cosy with the Executive. She knows why we want that. If the OBR places absolute primacy on its independence and impartiality, we must surely move away from any perceived suspicion that it is too close to or cosy with the Executive of the day.
We know that there is due to be a review of the OBR within a number of years. How that review will take place is a bit of a moot point, but we will come to that in due course. The Economic Secretary understands that we will be watching carefully for circumstances in which the OBR is too close to the Chancellor of the Exchequer. It is vital for it to remain distant from, and impartial between, the political parties. It must also have a good dialogue with Parliament.
Those are the important points that we wanted to make, and we know that the OBR will be listening to this debate. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Third Reading
Queen’s consent signified.
(13 years, 9 months ago)
Commons ChamberA lot of people would debate who those jobs were taken by. In reality, unemployment was higher—every Labour Government leaves office with unemployment higher than when they entered.
I want to talk about some of the most important aspects of the Bill. Employers will be £150 better off each year for each employee earning above the threshold. There will be an increase of 650,000 in the number of employees in respect of whom employers pay no national insurance contributions. Compared to this year, employers will pay less national insurance contribution in respect of those employees earning under £20,000. In fact, low-earning employees will also be better off, because the point at which they start to pay national insurance contributions is also going up—by about £23 per week. By reversing the planned employer national insurance increases, this package will help to maintain the UK’s attraction as a place to do business. In doing so, it will support the Government’s aim of creating a fairer and more competitive tax system. The national insurance holiday will help with the transition to a more sustainable model of economic growth, encourage private sector enterprise and investment where it is most needed, create jobs in some of our poorest regions, and encourage people to become business people, entrepreneurs and wealth creators—the very people who will lead the recovery.
Those points were made eloquently by my hon. Friend Member for Sevenoaks (Michael Fallon) and later by my hon. Friend the Member for York Outer (Julian Sturdy), who also talked about the burden of red tape, which is another matter that the Government are keen to reduce for businesses. My hon. Friend the Member for Central Devon (Mel Stride) talked about the need to support business, and to create new jobs and the positive culture that we need to engender throughout the country. That is absolutely what the Government want to do.
The Bill should be seen in the context of wider measures. The Government have taken several steps to support business. In the emergency budget we announced measures to reduce corporation tax, not raise it on large companies year on year. We announced measures to reduce the small companies rate of corporation tax. The hon. Member for Strangford (Jim Shannon) talked about what we can do to help small companies and new companies. He was right, and that is precisely why, instead of increasing corporation tax on those companies, we preferred to try to ensure that they can enjoy a rate decrease.
We have gone further. The regional growth fund will benefit all communities in our country. The capital infrastructure plan was announced as part of the spending review, and more capital will go into supporting our country’s infrastructure than would have happened under the previous Government. We have published the local growth White Paper.
In the hon. Lady’s list of Budget changes, what will be the impact of the VAT increase on employment?
Clearly, that must be seen in the context of our desperate need to tackle the fiscal deficit that the Labour party left us. It is one reason why our overall plan is not just to support business—that is clearly how we will grow our economy back to the healthy state that it needs to get to—but, as the hon. Gentleman pointed out, to make our numbers add up across the board. We must get rid of the structural deficit that his party handed over to us.
We believe that the package of measures is right, the OECD has said that it is moving in the right direction, and it has been welcomed throughout Europe. If the hon. Gentleman is saying that we should not increase VAT, that prompts a question. His right hon. Friend the Member for Edinburgh South West (Mr Darling) was interviewed recently and said that the Labour party would have increased VAT, so we cannot accept the hon. Gentleman’s comments that his party would not have increased it. There is a blank piece of paper, and at the top are the words, “Labour economic strategy”. It is time for the Labour party to start to become credible by trying at least to pull together and to plan for our economy. Most people will put the contributions about jobs and the complaints about reductions in national insurance not going far enough in the context of a party that has absolutely no alternative plan for managing our economy. They will realise that its arguments are not credible.
The regional aspect of national insurance policy must be seen in the context of the broader package to support business. The level of VAT registrations in different parts of our country and the number of jobs created in different parts of our country show that we need to ensure that we can stimulate growth, particularly in the communities that can benefit most from it. The policy should be looked at not in isolation, but in the context of the broader tax reductions on business and the rise in the personal allowance for employees. Nearly 900,000 of the lowest-income workers in our country will be taken out of income tax altogether. The vast majority of people will benefit from our proposals, and under the Bill many of them will be small businesses with a handful of employees.
(13 years, 9 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.
This information is provided by Parallel Parliament and does not comprise part of the offical record
I am sorry if I have hurt the hon. Gentleman’s feelings; that would be a dreadful thing to do. However, it is far worse to hit the poorest and most vulnerable people in society through the measures that he will support by walking through the Lobby. The warm words that he espouses are all very well, although so far he has not said much about vulnerability and the impact of the reforms. He is doing his job and wants to progress through his party—I wish him luck with that—but the measures that he will be supporting will be harmful, and I am sorry if he feels that that is insulting.
Let us look at some of the changes to housing benefit. As I said, housing benefit needs to be reformed, but not necessarily at the pace and with the harshness espoused by the Minister. Some of the combined, compounding changes will come in quickly, with some starting on 1 October next year. According to the Government’s own figures, the reduction from the median 50th percentile to the 30th percentile for housing benefit will affect 642,000 people. Many hon. Members, including the Minister, will be getting letters from their constituents about that. Those reforms will leave some people £39 worse off per calendar month. Some landlords might be happy to say, “That’s all right; we will bear the loss”, but others will say, “Sorry, that is unacceptable. Out you go.” What will be the consequences for homelessness? What will the pressures be on the indebtedness of individuals who are already stretched with credit card debts and so on? Will we see even greater pain at that level?
The National Housing Federation said in the newspapers today that the reforms were “brutal cutbacks.” Those are not my words, so if the hon. Member for Skipton and Ripon (Julian Smith) feels that such words are insulting, he should speak to the National Housing Federation. It said that the reforms risk the prospect of people
“falling into debt or hardship or being forced to move out of their home and away from their local community.”
That sudden drop in income and the rushed nature of reform are what the Labour party fundamentally disagrees with. Of course we accept that the deficit needs to be tackled, but we take a different view of how to do that.
You do not know how to do it.
We have a set of strategies, but we do not have the phalanx of Treasury officials lined up behind the Minister.
Perhaps the hon. Gentleman will outline three or four specific measures that his party would propose to tackle the deficit.
Given that we are talking about vulnerability, let us look at the impact of the spending review. The hon. Member for St Ives mentioned the banking levy but, as we debated last night, that is a puny and pathetic attempt by Ministers to let the banks off the hook while they are hitting families and children hardest of all—[Interruption.] I am sorry that Minister does not like my example, but she has made a choice and we would do things differently. It is important that the record shows that the Government have decided to let the banks off the hook lightly.
The Minister may well bleat and moan, but she should realise, for example, that cutting mortgage interest support for the most vulnerable will, as the Archbishop of Canterbury said, help to create a cycle of despair for many people. I do not think that the archbishop is a particularly partisan individual, and it would be a great pity if the remarks of those in civil society were dismissed.
I am interested in the Government’s approach to the universal credit, which they are looking to put in place as part of welfare reform. In many respects, it is a reasonable concept. However, I cannot understand why their approach is then to cut council tax benefit by 10% and to localise it, as has been announced. How is that consistent with the universal credit policy? Will the Minister elaborate on how the universal credit arrangement will come into place for the most vulnerable people when the council tax benefit is not part of it? I would like to understand the consistency, because that change will hit the poorest in society, as will many of the disability welfare changes.
We accept that disability welfare reforms are needed but, again, we must at least ask questions about the pace and harshness of some of those changes—as the hon. Member for St Ives has done. Taking out £2 billion by limiting the contributory employment and support allowance to the very disabled raises questions about how those who no longer have such support will cope. It is incumbent on those who are proposing the cut to explain where the support for those individuals will come from. Even pensioners will feel the impact of many of the changes, and they will lose out because of the four-year freeze in the savings credit element of the pension credit.
Public service reductions will have an indirect effect. This debate is not just about welfare, because the public service reductions announced in the spending review will also have a disproportionate impact on the very poorest in society. As the Institute for Fiscal Studies has said,
“modellable cuts to public services are regressive”.
There will also be a cut in health service spending. If we take away the social services element—it is being redefined as NHS spending, which it was not previously—and look at core NHS spending, it will fall by 0.5%. The IFS described that as the “worst settlement since 1951”. Again, those people using the health service are the most vulnerable and they will bear the brunt.
There will be local government reductions, in particular for support to the voluntary sector. For example, several welfare advice centres in my constituency will no longer be able to offer help and support to the very poorest in society because of the implementation of legal aid cuts. People will be left to fend for themselves, with far less advice—[Interruption.] The Minister is chuntering away, but she will get her opportunity to speak in a moment. I hope that she can give those people an explanation of the deficit reduction choices that she is making that deliberately addresses the speed of her measures. I understand that everyone in the House wants to ensure that deficit reduction is carried out sensitively, but I cannot quite understand the voracious speed at which the Minister thinks she has to do that. Her approach seems punitive and potentially risky.
There are education changes, too, and we have also talked about policing and crime. Those who tend to need the support of the policing services are those who are the victims of crime, and most of all the poorest and most vulnerable in society. The list goes on: reductions in the working neighbourhoods fund; no more future jobs fund; and, again, some of the welfare advice changes. Those things give rise to more worries and concerns.
The IFS was right to point out the regressive nature of the Budget. All the spin and warm words that the Minister will no doubt parrot again have been unravelled by the objective and independent analysis carried out by the institute, which the Conservatives were more than happy to cite in times past, but now seem keen to rubbish. The IFS says that the cuts are the
“deepest since the second world war”.
The Government have decided to hit families with children hardest, with the health in pregnancy grant going, the taxing and freezing of child benefit, the cuts to child care help through the working tax credit, and the scrapping of the education maintenance allowance. It is not necessarily those individual changes, but the compounding effect of them all happening simultaneously, with the speed of implementation chosen by the Minister, that makes them hit the most vulnerable very hard.
It was right that the hon. Member for St Ives raised the question of whether those with the broadest shoulders are bearing the greatest burden. The Chancellor keeps saying, “We’re all in this together,” but that is completely unbelievable and palpably not the case.
The puny nature of the banking levy is such that even the International Monetary Fund has said that it is a third of the size that it suggested. The banks will enjoy the corporation tax cuts, as well as their deferred tax benefits. There is also, of course, complete inaction by the Government on banker bonuses, which will be revealed when the bonus season starts in January or February.
All in all, the set of changes is exceptionally regressive and will hit the most vulnerable in society most of all. Perhaps the saddest fact is that many of those who will be affected do not yet realise it. The changes have not necessarily been reported in detail. People might well be completely oblivious to the changes that are coming but, for example, when the housing benefit change comes in on 1 October next year, they will be faced with great difficulties.
I have urged my local authority in Nottingham to find a way of communicating with recipients of housing benefit so that they can prepare themselves for the changes that are coming. Will the Minister at the very least—even if we disagree about the speed and nature of the policies—tell hon. Members how the Government intend to communicate with people and give them a bit of a heads-up so that they can prepare themselves for some of the changes? With a little preparation, the poorest in society might be able to try their best to brace themselves for what is around the corner.
I have set out my genuine concerns. There are political differences between us, but the story is a sad one that will unravel further in the years to come.
The hon. Gentleman raises one of the key flaws that has existed in the welfare system, which is that it has trapped people. Going back to my time on the Work and Pensions Committee, I remember an inquiry that we did into Jobcentre Plus. The then Government had to introduce a better-off test to prove to people that they were better off going into work, because it was so complicated to work out what benefits people were receiving and what they would lose. It was not clear to people that moving into work would be the best thing for them financially.
The hon. Gentleman will be interested to read the White Paper that the Department for Work and Pensions will release in the next few days on the universal credit, which is intended absolutely to make sure that people who are currently on benefits know that they will be better off if they move back into work. We can move away from the situation faced by some of the worst-off people in our country, who have moved into work only to be penalised with some of the highest marginal rates of tax, which are simply eye-watering. We would not dream of putting even the highest earners on such rates, but the marginal rates of tax faced by some of the lowest-income people have been huge, and the universal credit is aimed at starting to tackle that situation.
For the benefit of hon. Members, will the Minister tell us what the marginal rate of tax will be for families that lose child benefit when they earn more than a certain amount? What will the percentage be? As I understand it, earning £1 could result in £2,000 of lost child benefit.
I am sure the hon. Gentleman will want to consider those calculations in detail, but that brings us back to my concern about the Opposition’s engagement with the subject, which was typified by his intervention. Unfortunately, it was not at all constructive but deeply negative. At the heart of my concern about the Opposition’s lack of thoughtful strategy is the fact that he argues for a policy that would maintain child benefit for higher rate taxpayers.
No; I want to make some progress.
The hon. Member for Nottingham East could have set out some better alternatives, but he failed to do so. That is a shame for our democracy. I assure him that we are tackling problems in the welfare system that the previous Government failed to tackle; I had hoped that he would welcome that. I know that the Opposition agree with some of our welfare reforms; it would help if we knew which ones, as we could then have a genuine political debate about areas of disagreement.
The universal credit will be a big step forward, and a good one. It will ensure that people are no longer trapped in welfare, as they have been. The hon. Member for St Ives said that one of our achievements as a coalition Government was to re-establish the earnings link. He is right; against the backdrop of a difficult fiscal deficit, we have maintained pensioner benefits on things such as free eye tests, free prescriptions, the free bus pass and free TV licences for the over-75s. We have also increased the cold weather payment award permanently to £25.
The hon. Gentleman also mentioned social care. Again, it is symptomatic of what we have in mind that we must protect the most vulnerable. That is why we have added £2 billion to the social care bill, with £1 billion from the NHS and £1 billion from the budget of the Department for Communities and Local Government. That is precisely to ensure that local authorities do not need to restrict access to social care. The fact that the money comes from the NHS and the Department shows that we need them to work more closely together. The reality is that health and social care are inextricably linked. Indeed, good social care can protect the vulnerable and help them maintain a healthy and independent life. As MPs, we have all seen people in our surgeries who are very keen to do that, and we have all worked to help people maintain the independence that so many want. We have therefore been particularly careful to ensure that funding for social care is supported.
I turn to the hon. Gentleman’s important comments on housing benefit. In the changes that we made to housing benefit, we tried to ensure that we tackle the underpinning of affordable housing and the lack of new affordable housing. One reason why housing has become so expensive is the gap between demand and supply, and the fact that housing starts over the last 10 years have generally been lower than in the past. That was so particularly for social housing, and especially for affordable homes in places such as London.
That is the backdrop and the key reason why rents have risen and housing has generally become more expensive. The previous model of affordable housing did not work. If Government money had been thrown at it during an economic boom, we would have seen the sorts of affordable housing that were needed, but it did not happen. We therefore had to think of different ways to do it. We are working far more effectively with housing associations and other investors that want to create housing, to ensure that we get back to creating the levels of social housing and affordable housing that are needed. That means investment—£4.5 billion for new affordable homes and £2 billion for the decent homes programme. We also need a more flexible system of affordable housing to help those who need to move for work and to protect the most vulnerable, and one that is also fair to the taxpayer.
(13 years, 9 months ago)
Commons ChamberIt might well be that in that written answer the Exchequer Secretary’s definition of “financial services” extends slightly beyond the banks. I am happy to concede that point. Of course, we framed the new clause in order to explore the tax burden not just on the banks but on financial services more widely. However, even the hon. Gentleman would have to concede that the banks will probably be the principal beneficiaries of the corporation tax cut that he is choosing to give them at a time when he is taking money from young, pregnant mothers—the health in pregnancy grant, to name one example of an incongruous decision that might be questioned by our constituents.
I can see that the hon. Gentleman is slightly confused about the written answer, so I want to clarify it for him, as I have a copy of it. The figures he gave relate to “financial sector” companies, so does he accept that he got his figures wrong when he said he was talking specifically about the banks?
The hon. Lady has several thousand civil servants—for the time being, at least, before they are made redundant—in the Treasury to help her with the costings for such questions. I can only go with the facts published in Hansard. Perhaps she could save me the trouble of tabling a further written question to find out what the bank cashback arrangement will be on corporation tax. I will give way to her if she has to hand the precise figures on what the UK banks will be gaining from the corporation tax cut. Can she tell us what those figures are? If not, I will table a written question. If she can swiftly answer that, it will be for the benefit of the House. I am pretty sure that it will be a net gain for the banks.
Will the hon. Gentleman clarify whether the Labour party supports a financial transactions tax?
We want to review it. Does the hon. Lady? Is she interested in looking at the proposition, or is she ruling it out completely?
I note that the hon. Gentleman failed to answer my question. I will respond to him broadly when I have heard the rest of the debate, and when I have a chance to respond to his new clause.
I thought it was a simple question. I thought the whole point of a debate was to exchange views. I am happy to review the financial transactions tax. It is an important proposition, and it deserves serious consideration. The Minister does not seem to know whether she is allowed to review it. Perhaps some inspiration has come down from on high. There is scurrying around, and I see that the Chancellor has been paging her officials. I am sure that inspiration will come to her shortly.
Will the Minister say whether there should be a change in tax policy to rectify some of the loopholes, such as those in corporation tax? Should there be a further review of, for example, the bank payroll tax? Should banks have their right to carry tax losses forward limited so that they expire after a specific time, or would that be detrimental? Clearly, the Government’s feeble attempt to recoup something from the banks through the banking levy alone is barely denting their balance sheets and is dwarfed by, for example, the deferred tax assets that the banks are wielding according to the report.
Ministers should concede that the whole matter needs clearing up urgently if they are to have any hope of preventing widespread public cynicism, discontent and anger. In short, as things stand, all we see from the Government is a puny banking levy, banks still using corporation tax loopholes at taxpayers’ expense, promises on bankers’ bonuses unfulfilled, promises on banks’ net lending targets more distant than ever, and inaction on reforms to the banking taxation system. The taxpayers of this country deserve better.
The hon. Gentleman is right that the bank levy itself needs to be viewed in the context of overall policy. He is right that it is not just about the bank levy; we have to look at it in the light of the broader changes around regulatory reform and the work of the Independent Commission on Banking. I will shortly come on to explain what that means for new clause 3.
We know that we have to tackle the regulatory failures of the past. We also know that it is right that banks make a contribution in respect of the risks they pose to the UK economy, but there is no benefit in taking action that would simply drive banks abroad. As the hon. Member for Islwyn (Chris Evans) pointed out, hundreds of thousands of jobs across the UK depend on Britain being competitive in this industry. For the financial services sector as a whole, as of June 2009, it had 1 million employees. The jobs are not just in London and the south-east, as there are nearly 100,000 people employed within the financial services industry in the north-west, while there are between 69,000 and 70,000 people employed by that industry in the east of England and about 90,000 in Scotland. Although there have been serious failures in the past, we also have to remember that many of the jobs that are part of this overall sector do not bring in high incomes, as the hon. Gentleman pointed out.
I am following the hon. Lady’s logic. She is saying that we do not want to do anything that would drive the banks away—that old chestnut again—but is she seriously saying that the proposal in the new clause to have a review of the level of taxation would be enough to frighten them all offshore? Is she really saying that?
The IMF has expressed its own views around levels of taxation. In the broader international context, which the hon. Member for Nottingham East (Chris Leslie) mentioned, there are questions about the introduction of a financial transaction tax and a financial activities tax. Unlike the hon. Gentleman’s party, we were prepared to introduce a bank levy nationally, but there are also discussions taking place about international measures that might be taken.
In fact, over and above the bank levy, the Government are taking a tougher approach to tackling tax avoidance by the banks. Prior to the spending review, only four of the top 15 banks had adopted the previous Government’s code of practice. We have asked Her Majesty’s Revenue and Customs to work with banks to make sure they adopt and implement the code by the end of this month, thereby making the commitment to comply with both the letter and the spirit of the law, and not to engage in or promote tax avoidance.
New clause 3 provides:
“The Treasury shall publish a report before the 2011 Budget examining the level of taxation on the banking and financial services industry.”
We have had some sort of rationale for it, but I have to say that I see little merit in making such a report in isolation. The report itself would be no substitute for the overall strategy for improved regulation and the complementary bank levy ensuring banks make a contribution in respect of the risk they pose to the financial system and wider economy. As set out in the spending review, the Government will continue to monitor tax receipts from the banking sector to ensure that banks make a fair and growing contribution to the public finances as the economy recovers.
In addition, there are, of course, already statistics available on the amount of tax revenue derived from the financial services sector. Historical figures for corporation tax receipts paid by several broadly defined business sectors are regularly updated and published on the HMRC national statistics website. To improve predictability, it is important that the Government provide clarity on the direction of tax policy, and the vehicle through which that is best delivered is the Budget itself. The new clause would require the Government to produce a superfluous report in advance of the Budget and therefore in advance of any announcements that the Chancellor might wish to make about tax policy generally that might impact on the banking and financial services industries.
The Opposition want a report on the banking industry. What the Government want, and what we have, is a strategy to ensure that the financial services sector pays its fair share. We have been clear about what we want to achieve, not only through the bank levy but through the code of practice, and by fixing the banks’ ineffective regulatory system—the system established by the last Government, who let our country down so badly. The new clause does nothing to support those aims, and I ask the hon. Member for Nottingham East to withdraw it. If he is not willing to do so, an apology to the British people for the mess of a regulatory scheme that he left behind would not go amiss.
What cheek the Minister has to start claiming, in that revisionist way, that her party was always saying that it wanted heavier regulation of the banks in the 1980s and 1990s, and that the Labour party was always advocating the lightest of light touches.
The Minister has completely failed to address the substance of the new clause. We were not even arguing for a change of policy, although I think that we may deal with that on another occasion; we were simply asking for a review of the levels of tax paid by the banks. The Minister did not address that. Nor did she address the issue of bankability. My hon. Friend the Member for Islwyn (Chris Evans) rightly distinguished between lower-paid employees in the banking sector and the high-rolling, highly paid bonus recipients who are in a league of their own.
The Government have taken no action on banker bonuses, despite all their rhetoric. As my hon. Friend the Member for Streatham (Mr Umunna) pointed out, although the Government had claimed earlier that they wanted to see the banks paying their fair share, they were quite happy to set the banking levy at a puny level. It was interesting to note that the Minister body-swerved the point about the IMF’s suggestion that the levy should be higher, and I think that we should examine that methodology on another occasion.
My hon. Friend the Member for Scunthorpe (Nic Dakin) rightly observed that new clause 3 simply seeks transparency and accountability, which must be an important part of proving that we are genuinely all in it together, as the Government like to claim. The Government are going to hit the public generally, cutting services, abolishing education maintenance allowances, taxing child benefit and raising VAT; yet they are unable to do anything about the banks.
We accept that the Independent Commission on Banking is investigating the matter and that regulatory reform is needed, but why can we not have a review of the level of taxes? That is all that we are asking for. What are the Government scared of? They have not given us an answer, and I think that we should divide the House.
(14 years, 1 month ago)
Commons ChamberA whole range of analyses and impact statements will come out with the legislation. I suspect that, as my hon. Friend the Member for Chelsea and Fulham (Greg Hands) behind me is saying, any work that is done would give an answer that Opposition Members would not like, because it would show that we are no longer going to give basic rate tax relief to people who can afford to pay hundreds of thousands of pounds into a pension pot every year.
Let me address some of the issues that have been raised. I have set out the time frame within which we want to progress towards a better alternative to the current system. We all agree that, for pensions tax relief to remain affordable, we have to limit high levels of tax-privileged pensions saving, but we think that there is a better way of doing it than the one set out by the previous Government. We believe it is important to reduce the annual allowance to prevent people from saving £255,000 a year tax free.
The hon. Member for Wallasey mentioned instances of people suddenly being able to pay a large amount into a pension fund on a one-off basis. She was right to raise that matter, and we shall be looking at options for protecting basic rate taxpayers and supporting any hard cases caused by such one-off spikes in pension accruals. She also asked about the lifetime allowance being changed. We have not ruled that out, but it is obviously a key mechanism that sits alongside the annual allowance. We shall therefore have to look at it in the context of where we end up going with the annual allowance limit. I should say that all this is subject to being able to work with key stakeholders to get something that we believe we can rely on. That is why the provisions will give us the power to repeal that measure, if we can find a better way.
I particularly want to respond to the argument from Labour Members that our proposals would somehow give a tax break to the most well-off people in the country. Let us have a look at some of the figures involved. Of course, the minute I say that, I lose the relevant bit of paper. Ah, here it is. Under the terms of the Finance Act 2010, someone who is contributing £283,000 to their pension fund on an annual basis would have had a tax charge, net of pension relief, of £85,000. Someone making the same contribution to their pension pot under a potential annual allowance level of £35,000 would have a tax charge, net of relief, of £124,000. The reason for that is that they would get 20% tax relief on the income that they would otherwise have paid a much higher rate of tax on. That is why they would pay just under £40,000 a year more under our proposed scheme than they would have done under the previous Government’s arrangements.
I wonder whether those Labour MPs who are so concerned about the impact of tax policy on the better-off people in this country will go through the Lobby today and vote for a measure that means that people who can afford to pay £283,000 a year into their pension pot will pay £40,000 less tax than they would previously have done. I do not know what Labour Members think “good” looks like in relation to taxing better-off people, but I guess I will find out when we have a Division on this amendment shortly.
The hon. Lady is talking to us as though we were schoolchildren, but she will not publish her proposals. Will she now agree to place in the Library a copy of the table that she has in front of her straight away, or this evening, so that we can all share in this secret plan?
I would have thought that the hon. Gentleman was so intelligent that he could do the maths himself. The calculation is pretty straightforward. It is a bit like doing a tax calculation where someone has an allowance and then a rate, and they apply it to the excess of the allowance that they are paying in extra.
I have no recollection of that, but I will not take up more of the time of the Committee. The last figures that I set out probably spoke louder—
On a point of order, Mr Amess. Is it in order for the Minister to withhold information to which she has clearly referred in the debate from the rest of the Members engaging in the discussion?
(14 years, 1 month ago)
Commons ChamberOne of the reasons why we set up the Office for Budget Responsibility was to ensure far more independent and transparent forecasting in relation to not just exports but all economic indicators. I am sure that over time the OBR will continue to develop that forecasting to make it even more effective. Let us make no mistake: setting up the OBR was a huge step forward in terms not just of transparency, but of robust data on which the public can really rely.
Will not our exporters be hurt by the slashing of the capital allowances that went to our manufacturing industries? Is it not a hallmark of the Government’s priorities that they would rather give £400 million cashback to the banks by cutting their corporation tax than support our small and medium-sized enterprises in their export activities?
I am not sure whether the hon. Gentleman has talked to industry about its reaction to the Budget. I think that if he talked to the Institute of Directors, the CBI and the Federation of Small Businesses he would find that they welcome it, because they know it will help them to grow their businesses and grow employment. I only wish that the hon. Gentleman could recognise that and welcome it too.