Budget Changes
Chuka Umunna Excerpts(8 years, 9 months ago)
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Mr Gauke
Yes, I can confirm that. The changes to small business rate relief will help hundreds of thousands of businesses, particularly small businesses. We are delivering on the pledge in the Conservative party manifesto to increase the higher rate threshold to £50,000—this Budget takes it to £45,000—and we are also raising the personal allowance. The typical basic rate taxpayer is now paying more than £1,000 less in income tax as a consequence of the changes we have made.
Mr Chuka Umunna (Streatham) (Lab)
The Minister has talked about debt and our record. Of course, the last Government borrowed more in five years than the Labour Government did in 13 years. We understand that Conservative Members are clamouring for a change to the PIP proposals, on the basis that they disproportionately hit the disabled. If that is the case, why not also reverse another measure that disproportionately hits the disabled—namely, the disgraceful and appalling bedroom tax?
Mr Gauke
Let me deal with this point. During the whole of the last Parliament, we debated in this place measures to reduce spending and the Labour party constantly opposed them. It argued that we should borrow more—I presume this is what the hon. Gentleman means from what he has just said—to borrow less. If that is the position of the shadow shadow Chancellor, it is not much of an improvement on that of the shadow Chancellor. It is right that we try to find savings in the welfare budget, and the spare room subsidy is an important part of that.
Tax Credits
Chuka Umunna Excerpts(9 years, 2 months ago)
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Damian Hinds
It does answer the question. The hon. Gentleman was suggesting that this proportion would not benefit from a national living wage, which is incorrect. A lot of people who are not on today’s minimum wage will also benefit to a sum of about—[Interruption.] I am asked how many—the estimate is that about 6 million people will benefit directly or indirectly.
Mr Chuka Umunna (Streatham) (Lab)
Let me ask the Minister about the subsidy point. We can all agree on the context that we need to reconfigure our labour market. Almost 6 million people are not earning a wage that they can live on. Ultimately, yes, a subsidy going to employers is not desirable, but surely the issue here is the order in which we transform our economy. The fact is that through a properly prosecuted industrial strategy—something that we have obviously not seen in our steel industry—it is possible to reconfigure the labour market. That should come first—before taking away the tax credits and support from people who are not earning enough. Ultimately, that is the difference between the two sides.
Damian Hinds
The harsh reality that we face is that we have a budget deficit equivalent to £3,300 for every household in the country. We need to take firm action on that now. It is right, as I said earlier, that the burden is spread right throughout society, but it is also right to shift the burden towards the upper end, which is what has happened with the tax burden.
Budget Resolutions and Economic Situation
Chuka Umunna Excerpts(9 years, 5 months ago)
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Mr Chuka Umunna (Streatham) (Lab)
We gather here today to conclude the Budget debates, but before I dive in, I want to put the Budget in a long-term, global context.
All political parties in advanced economies face the challenge of translating their values into action in an era of change and globalisation. In some circles “globalisation” is seen as a dirty word, but in my view it is wrong to view it as such. We cannot ignore the fact that it has lifted millions of people out of poverty and destitution in developing economies around the world: that is something that we should celebrate. It has also expanded opportunities in advanced economies for some particularly highly skilled, internationally mobile workers. However, globalisation, powered by technological forces, is also displacing and reshaping industry after industry in economies like ours. It has failed to deliver for nearly enough people in middle and lower-income jobs, often destroying jobs that families and whole communities have done for generations.
The nature of work is also changing. More people are becoming self-employed, and more people need to work around caring and family responsibilities. That is not a bad thing, but our systems are not set up to serve those new work patterns so well. Anyone who speaks to a self-employed person about how difficult it is to take out a mortgage, or to a working family about the rising cost of childcare or the challenge of working while also caring for an elderly relative, will see what I mean. Economic policy is about nothing if it is not about the job that people do, from which so much else flows: self-esteem, a sense of security, and the ability to support a family.
The job of Governments, in addition to providing a safety net for those who cannot work, is to decide what policy responses can transform the challenges posed by technology, globalisation, and other changes from obstacles to solutions—solutions to problems related to jobs, growth and competitiveness—today and in the coming decades. That, ultimately, is the yardstick against which we must measure the Government’s Budgets during this Parliament. Do they empower people to get on in an era of globalisation? Do they promote growth and prosperity, at the same time as reducing our debt and deficit in a fair way?
Let me now turn specifically to this Parliament’s first Budget, and the projections for the economy and public finances in the short term. The Office for Budget Responsibility’s growth forecasts for the forecast period are relatively unchanged compared to those in March, although growth has been revised down for this year. The current recovery is real, but it is the slowest on record. The economy is still fragile. If that were not the case, the foot would not be firmly on the floor when it comes to monetary policy levers: the base rate has sat at 0.5% for more than six years. So there can be no complacency on growth. At the same time, we still need to reduce public sector borrowing and the national debt in the wake of the global financial crisis of 2008-09. That crash was triggered by grossly irresponsible behaviour in the banking sector. It caused a recession that precipitated a fall in tax receipts and the debt and the deficit to substantially increase. I will deal with the debt and deficit issues first, because I want to deal in more detail with matters of growth. Ultimately, the best way to reduce our debts is by people earning more and for the economy to grow in a sustainable way.
James Cleverly (Braintree) (Con)
The hon. Gentleman sticks rigidly to the Labour party’s script that it was all the fault of the banking sector, but does he concede that his Government—whether through too little, too much or the wrong regulation—had any part to play in the economic downturn we are now coming out of?
Mr Umunna
First, undoubtedly we should have better regulated the banks during our time in office, but it is worth Conservative Members remembering that the Financial Services and Markets Act 2000 that put in place a tripartite system for banking regulation was not opposed by them at the time—[Interruption.] No, it was not; I have read the Hansard myself. It is also worth noting that, to the extent that we were criticised by Conservative Members, they were saying we were regulating the banking sector too much.
Secondly, I will happily acknowledge that after 15 years of economic expansion we should not have been running a deficit—albeit an historically small and unremarkable one—going into the crash, but again I remind Conservative Members that the average deficit during our time in office before the crash hit was 1.3% of GDP, whereas in the 18 previous years it was 3.2%. It was not that small deficit that caused the increase in the wake of the crash; it was the fall in tax receipts precipitated by the recession.
David Rutley
By anybody’s measure there was a record structural deficit before the crash. That was on the Labour Government’s watch. Will the hon. Gentleman now join others in his party who have had the guts to apologise for creating that huge structural deficit?
Robert Flello (Stoke-on-Trent South) (Lab)
I came into this House in 2005, and right up until the crash, week in, week out Conservative Members were saying in the Chamber and in Committee meetings that we were killing the banks—that we were stifling them with overregulation and we needed to weaken it. I also remember them coming to the House week in, week out saying they wanted more schools and hospitals in their constituencies; they wanted more spending.
Geraint Davies
Does my hon. Friend agree that in the 10 years up to the 2008 banking crisis the economy grew by 40% under Labour, which is how we afforded to double spending on the health service, and that since 2010—when, incidentally, the economy was growing under Labour—the share of the economy that is debt has risen from 55% to 80% because of the Conservatives’ failure to grow the economy and their focus on cuts instead of growth to get the deficit down?
Mr Umunna
I will come on to that right now.
The Prime Minister said in a speech to the CBI in 2010:
“In five years’ time, we will have balanced the books.”
The Government have failed to do that. It is worth revisiting the promises made then before giving the Chancellor the congratulations he seeks now for this 2015 Budget. In June 2010 they set a forward-looking fiscal mandate to achieve a cyclically adjusted current balance by this financial year. It was a rolling target, but no one took the rolling nature of it very seriously, so let us put that to one side. In short, they were saying they would eliminate the deficit by this financial year. In 2010, by their own measure, we were told they would do this, achieving a surplus of 0.3% last year and 0.8% this year. That is what we were told would happen. In the event, the Chancellor completely failed to meet that goal. The deficit came in at 2.4% last year, is forecast to be 1.7% of GDP this year and does not move into a surplus until 2017-18, some three years later than planned on their own measures.
There was also a supplementary target for public sector net debt as a proportion of GDP to be falling by 2015-16. The Chancellor managed to achieve that through some jiggery-pokery with the numbers, namely rapid asset sales in the last Parliament to pay down enough of the debt for his supplementary target to be met. But rushed asset sales mean poor value for the taxpayer, as the disastrous sale of Royal Mail illustrated in technicolour.
It is also worth reflecting on what we were told the debt-to-GDP ratio would be in 2010. It was supposed to fall from 61.9% of GDP in 2010 to 69.4% and 67.4% last year and this year, but debt as a proportion of GDP was 80.8% last year and is forecast to be 80.3% this year.
Mr Umunna
The truth is—I say this to the Chief Secretary—the Government borrowed over £200 billion more than they planned in the last five years. That is more in five years than the last Labour Government borrowed in 13 years. Now they want us to pat them on the back for their failure. I will not do it.
James Cleverly
The hon. Gentleman bemoans rushed asset sales. Does that include the significant sale of our gold reserves under a former Labour Chancellor of the Exchequer?
Mr Umunna
Oh dear; I think I will move on.
Why does all this matter? It matters because reducing the deficit is a progressive endeavour. We seek to balance the books because it is the right thing to do. We will not stand by while the state spends more paying interest every year to City speculators and investors holding Government debt than on people’s housing, skills or transport. It follows that aiming to reduce the national debt in the long term, and running surpluses when the economic circumstances allow and the economy is robust, is the right approach. It means we can free resources to invest in people to help them succeed in an era of globalisation. I would much rather invest in people than spend the £36 billion the Red Book tells us we will be spending on debt interest this financial year.
By the way, I say to Conservative Members that this is in keeping with the history of our party. In our 1964 election-winning manifesto we criticised, as we did in the lead-in to the last general election, “an ever-increasing burden” of debt payment on the country. I note that the Chancellor wants to legislate to make surpluses a legal requirement in “normal times”. In 2010, when the then Chancellor Alistair Darling sought to enshrine in law, in the Fiscal Responsibility Act 2010, a deficit reduction target, the Chancellor said that it was “vacuous and irrelevant.” to enshrine such things in law. The Conservatives now need to explain what has brought about this change of mind.
This recognition that we need to reduce the national debt is why we said before the last general election that there would be efficiency savings and cuts under a future Labour Government. However, we were clear we would achieve this in a fair way—not by balancing the books of the nation off the backs of the poor and the vulnerable. The centrepiece of this Budget was to proceed with further fiscal consolidation, principally by slashing the support which helps—[Interruption.] I ask the Minister for Skills to wait for me to finish my paragraph, and then perhaps he can comment on the national living wage.
As I was saying, the centrepiece of this Budget was to proceed with further fiscal consolidation, principally by slashing the support that, for lower and middle income earners, helps to make work pay, and then by supposedly compensating them with an increase in the national minimum wage, which people such as the Skills Minister have sought to re-badge as a living wage, even though it is anything but. Let me say a few things about that. No one will ever forget how the Conservatives opposed the very establishment of the national minimum wage in the first place. They can say what they like about it now, but no one will ever forget that.
In the lead-up to the election, I received sustained criticism from the Conservatives’ supporters in business about our plans to increase the national minimum wage in this Parliament. People say that imitation is the sincerest form of flattery, and in some senses that is what this is, but there are important differences between what we were proposing to do and what the Government are now doing. First, our national minimum wage increase would have applied to all adults on the main rate. This Government, however, do not believe that anyone aged between 21 and 24 deserves an increase. Having abolished their education maintenance allowance and trebled their tuition fees, they are now saying that when those young people get into work, they do not deserve to earn what everyone else does when they reach adulthood.
Secondly, we would not have punished any adult benefiting from the increase we were proposing by subsequently withdrawing their tax credits. The Government have called this a new deal, but it is a gigantic con-trick. Thirteen million families will be affected by the changes, and the Institute for Fiscal Studies could not have been clearer when it said that it was “arithmetically impossible” for the increase in the minimum wage to make up for the withdrawal of the credits that help people to work.
Let us take as an example a couple, both aged over 25, with two children. Both adults work full time and earn the minimum wage. Yes, they will gain £1,560 from the increase in the minimum wage, but they will lose more than £2,200 next year as a result of the change to tax credits. [Interruption.] I say to the Conservative Members who are chuntering that I totally accept that it would be better for people to be in receipt of a salary that did not necessitate the payment of tax credits to make ends meet, but reforming our economy so that it delivers more highly paid jobs must come first; otherwise, it is the working poor who will suffer.
Let me remind Conservative Members that nearly half the people in poverty in this country are in work. The Government seem to forget that. That is why it is unsurprising that the IFS calls this a “regressive” budget and says that the tax and welfare changes between them will result in poorer households losing out quite significantly, and much more significantly than richer households.
Geraint Davies
Does my hon. Friend agree that the minimum wage increase cannot replace children’s tax credits? If a single man and a woman with two children both went for the same job, which paid the minimum wage, the woman would have greater needs due to her childcare responsibilities. Tax credits provide an incentive for people such as her to work, yet they are being withdrawn. We accept that increasing the minimum wage is a good idea, but this measure will not help business at all, because putting up the minimum wage while removing tax credits will clearly be a disincentive for families to work.
Mr Umunna
That is quite right. The problem with Conservative Members is that they just lump everyone into the same bracket. Anyone who is in receipt of support is told, “It’s your fault. You’re not working.” The thing about tax credits is that they help to make work pay, but that seems to be lost on Government Members—
Paul Scully
The hon. Gentleman mentioned welfare changes. Does he agree with his interim leader that Labour should support a number of the welfare changes that we are proposing?
Mr Umunna
We are very clear that, in principle, we accept the benefit cap. In respect of the overall changes to tax credits, I have just made a comprehensive argument to illustrate the problem with those. This is not just about the overall tax changes. I will come on to talk about the withdrawal of support for students in poorer households, which the hon. Gentleman is going to vote for, and about other matters. It is for all those reasons that we cannot give our overall support to this Budget.
Ultimately, the best way to cut the deficit and the debt is to ensure that we have better-paid jobs, which will increase tax receipts and reduce people’s need for extra support from the state. We are among the countries with the highest incidence of low-paid work in the developed world. We come fifth in the rankings of the OECD economies in that respect. We have to change that by rebalancing and restructuring our economy through the active prosecution of industrial strategies—a term that the Business Secretary seems to have a problem with. Now is not the time to junk the approach that started under the last Labour Government and that his Liberal Democrat predecessor sought to continue. Now is the time to move up a gear on industrial strategy if we are to achieve the necessary rebalancing. I say this because, in fairness to the Government, they started with good intentions and sought to rebalance the economy, with their Liberal Democrat partners, from 2010.
I am happy to acknowledge—and have done so publicly—that rebalancing was something that the Major Government failed to do and that we failed sufficiently to address in office, in spite of our many achievements. Our economy was one with too few savings; it was also too concentrated in too few sectors and regions of the UK, and it was based too strongly on cheap credit. The problem is that the current recovery has those same weaknesses that have plagued British recoveries for decades: productivity growth has been absent, as the Business Secretary mentioned; our export performance remains lacklustre; output depends on private consumption; household debt is rising; regional imbalances persist; and investment in innovation and research and development lags behind that of our competitors. I am not at all convinced that the Budget will reverse those weaknesses.
Tulip Siddiq (Hampstead and Kilburn) (Lab)
Going back to the question of tax credits, does my hon. Friend agree that they gave a boost to employment, and especially to the employment of families with a single parent? Between 1997 and 2010, employment in that group increased by 28%.
Mr Umunna
My hon. Friend makes a very good point.
I want to comment on each element of the rebalancing that the Business Secretary mentioned. The first relates to productivity. We have the worst productivity in the G7, save for Japan. There was some fanfare around the Treasury-BIS co-sponsored productivity plan published on Friday—[Interruption.] Ministers might chunter, but having taken account of that amazing plan, the Office for Budget Responsibility has downgraded its forecast for productivity per hour for next year and the following three years. I am not surprised. Two key ways of increasing productivity are to sort out the skills system, which is simply not doing enough to resolve the chronic skills shortages in our economy, and to boost business investment.
After half a decade of Tory-led Government, the CBI warned in its annual skills survey this week of ongoing skills shortages acting as a drag on productivity. Its deputy director general could not have been clearer yesterday when she said that
“firms are facing a skills emergency now, threatening to starve economic growth. Worryingly, it’s those high-growth, high-value sectors with the most potential which are the ones under most pressure. That includes construction, manufacturing, science, engineering and technology.”
Of course we all want to see more apprenticeships, and we support the proposed apprenticeship levy, but we need to see far more action from the Government to ensure that all those apprenticeships are of sufficient quality to reduce the skills shortage. More than one in five apprentices are currently receiving no formal training whatsoever, and almost four in 10 employers do not regard the qualifications they are providing as apprenticeships, even though the Government deem them to be apprenticeship qualifications. Also, there are simply not enough people doing qualifications at level 3 and above.
Mr Jim Cunningham
It has always been generally accepted that, at a time of economic downturn, we should train people with the skills necessary to bring about the upturn. I have never understood why that was not undertaken sooner in this country. Germany has been doing it for many years. Why has it taken until now for the Government here to recognise that?
Mr Umunna
That is a good question, but in fairness I do not believe that there was consensus among employers that that would help increase the number and quality of apprenticeships. There is growing consensus in much of our manufacturing sector in particular—I know that my hon. Friend represents a constituency with a wonderful manufacturing tradition and history—that they must go down this route to prevent those who are not providing training in the different sectors from freeloading.
Mr Cunningham
I have worked in manufacturing, unlike the Secretary of State, who had a crack earlier about visiting Rover. I have not only visited the factories, I have actually worked in the factories. One thing we did when I was involved in the trade unions to try to encourage employment, and particularly investment, was to get the companies to invest, as in a recession the first thing that happens is that training budgets are cut.
Mr Umunna
My hon. Friend makes a very good point. While I am on the subject of apprenticeships, it is worth remembering that the number of apprentices still not receiving the legal minimum wage is alarming. According to the Government’s recent apprenticeship pay survey, 15% are not receiving the appropriate minimum wage, rising to 24% for young apprentices. If we want more young people to study the science, technology, engineering and maths skills that we need them to study, taking away the maintenance grant from the poorest who want to study those subjects at university is hardly the way to encourage that. The Government are taking a huge gamble that that policy will not deter students from lower-income households from going to university.
Catherine West (Hornsey and Wood Green) (Lab)
Does my hon. Friend agree that cuts to further education of up to 24% could undermine the good idea of the employment levy? That is the glue that holds the whole thing together.
Mr Umunna
That is a good point. The cuts that the Government are making in FE are already having a hugely negative impact, not least in the college that the Secretary of State attended.
To go back to undergraduate student financing, I note that the Government are switching from student grants to loans, but that simply dumps more debt on students. In the end, that is debt that, along with the loans taken out to pay tuition fees, will end up in the hands of the taxpayer. It is estimated, according to House of Commons Library figures, that that will add £280 billion to the national debt and we have heard no solutions from the Government to address that.
In the 2011 plan for growth, the Government told us to judge them not only against their achievements on skills but on whether they helped to deliver a substantial boost in business investment. Clearly, we must address that, because, as I said, our performance lags behind that of our competitors.
Mr Anderson
The Secretary of State said that the Government were working on a one-nation basis. Young people in this one nation are being deprived—they are being denied maintenance grants, will lose housing benefit and will not be allowed the proper living wage or minimum wage, yet they are supposed to be able to make their way in that one nation. Is that not nothing other than a two-nation strategy from the Conservative party?
Mr Umunna
My hon. Friend is right to draw attention to the assault on the aspirations of young people all the way from school to when they get a job. We remember that the Government stopped the Building Schools for the Future programme, which helped to give our young people a decent place to work. The Government took away the education maintenance allowance when people got to college and trebled their tuition fees when they got to university. Now, when they leave university the Government tell them that they should not earn as much as everybody else and that they will not extend the increase in the national living wage to those under 25.
Let me return to research and development. Although I welcome putting the annual investment allowance on a more long-term footing and the corporation tax changes, which also help, I would ask Ministers, who have suddenly perked up, this: where was the action on business rates for small businesses in this Budget? They create two thirds of private sector jobs, so where was the news for them?
Reducing the tax burden is all well and good, but in order to invest people need to be able to raise the finance to do so. According to the Bank of England, net lending to small firms has fallen by more than £1 billion in the past year and it continues to be an issue. Towards the end of his time in office, the Secretary of State’s predecessor joined us in championing a state-backed investment bank and put in place the British Business Bank, which we support. Now that he is no longer in post, and with the Government flogging off the Green Investment Bank, the British Business Bank has had no guarantees of future funding in the spending review and faces an uncertain future. I note that there was just one mention of it in the Red Book. I am happy to give way to the Business Secretary if he wants to answer this question: can he confirm today whether the Government plan to sell off the British Business Bank, too, and can he rule out doing that in this Parliament? The silence is deafening.
Let me turn now to infrastructure. We must end the dither and delay in making decisions on projects that not only increase our productivity but iron out regional imbalances and help people travel around in a more cost-effective way. In the Red Book, we are told that the Government believe that a modern infrastructure network is vital, so why, having commissioned the Davies report on aviation, do they appear to be locking themselves into a holding pattern right through until the autumn before coming into land and making a decision on this important matter? Our aviation industry employs hundreds of thousands of people, contributes more than £50 billion to GDP and pays the Exchequer more than £8 billion in tax every year. We have been clear that we will make a swift decision on this matter in the national interest. If the commission’s proposals to build a third runway at Heathrow can meet our tests, including consistency with our climate change obligations, we will take swift action to back them. I suspect that the Business Secretary agrees with me and all I say to him is that he needs to face down the opposition arising in Cabinet and do the right thing.
As for the regional growth policy, there has been a lot of chat about the northern powerhouse, so let me make a few observations. We cannot build a powerhouse if there is no power to connect our northern cities. The decision to shelve northern rail electrification, such as for the TransPennine Express route between Manchester and Leeds, was a kick in the teeth to the areas and regions of the north, and plans for a northern Oyster card do not make up for it. If I have one criticism of the Government’s overall approach to devolution, it is that they should be seeking to make every region a powerhouse rather than simply having a northern powerhouse.
Madam Deputy Speaker (Mrs Eleanor Laing)
Order. Before the hon. Gentleman gives way any more times, I should draw his attention and that of the House to the fact that a very large number of colleagues wish to speak in this important debate. The hon. Gentleman has taken well over half an hour of the time so far, in contrast to the Secretary of State—[Interruption.] Order. I hope that the hon. Gentleman will bear that in mind before considering taking further interventions.
Mr Umunna
I think my generosity in taking interventions perhaps got the better of me, Madam Deputy Speaker.
Let me finish by dealing with trade. In 2010, we were promised that an export boom would fuel the recovery. The Government set a target of tripling exports to £1 trillion by 2020 and getting 100,000 more small businesses exporting. What has happened since? The current account deficit widened to 5.9% of GDP last year —the largest peacetime deficit since at least 1830 according to the OBR. Frankly, I am not surprised given the degree to which we have seen various initiatives fail. Ministers have to sort out what is happening at UK Trade & Investment. UKTI’s own surveys show that more than a quarter of businesses that use its services saw no business benefit in doing so, and it is little wonder when we consider the range of different schemes and the failure to command the attention of Ministers. Records are not even kept of the trade missions that Ministers go on.
We are a great country. We have a great history and great people. We have a tradition not only of ensuring that those who can get on are able to realise their ambitions and aspirations, but of looking after those who cannot. That is one of the big problems with the Budget: it is unfair and regressive. Ultimately, if we really want to get the economy powering on all levels, we have to ensure that our people have the wherewithal and the tools to do that, particularly the skills and business investment needed, but they come up short as well. This Budget is unfair and not equal to the challenges we face as a country, and that is why I ask all hon. Members to support us in opposing the Budget today.
Pub Companies
Chuka Umunna Excerpts(10 years, 11 months ago)
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Paul Murphy
Indeed. In which case he would be opposed to the big energy companies, the shenanigans of the bankers and—I believe that he is—the way the pub companies operate, which is to the detriment of the small and medium-sized enterprises that are our pubs. I therefore think that he is on our side.
However, I know from my years in government that things can be delayed for other reasons, even if Ministers pretend that it is because the consultation exercise is too big to handle. I think that the Secretary of State is meeting opposition from Cabinet colleagues, maybe from the Treasury and maybe from the top. The consultation ended months ago and the timetable is now tight, and I do not believe for one second that the delay is being caused by anything other than Government disagreement, whoever it is from.
The longer the delay continues, the greater the damage to public houses in our communities. Some 26 pubs a week are closing. The pub companies themselves have caused thousands upon thousands to close. Some of those closed pubs have now been taken over by big companies and turned into shops—I think Tesco has taken over 130 in the past few months. When we bear in mind the importance of pubs to our communities, we realise that the longer the delay continues, the worse the situation will get.
The Secretary of State has the power to change that. He could persuade his colleagues—that is where the problem is coming from—on how to change those things. Unless he does so, all the promises that he was forced to make last year, which I believe he thinks are right, will come to nought.
Mr Chuka Umunna (Streatham) (Lab)
What puzzles the Opposition is the fact that the Secretary of State has accepted in principle the need for a legislative code, so I do not understand why he is unable to commit today to taking legislative action by at least the end of this Parliament, given that that is what he is consulting on. Does my right hon. Friend, like me, fail to understand why we are not seeing that commitment from the Secretary of State?
Paul Murphy
I repeat that I think the reason is that he is encountering opposition within the Government.
The Secretary of State is right that things have changed. Having been a Cabinet Minister for eight years and having dealt with all sorts of consultations, my experience is that we must of course take them seriously and look at the pros and cons, but he had already made up his mind, more or less, before the consultation was done. The consequence of all that is that he has to battle on. He has to get back into the Cabinet Committees and persuade his colleagues that this is important. Let us ensure that in the Queen’s Speech there is a proper Bill to put right what is clearly wrong.
Budget Resolutions and Economic Situation
Chuka Umunna Excerpts(11 years, 9 months ago)
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Vince Cable
I think the shadow Chancellor is digging himself into a certain amount of trouble. He refers to a document as fact, but it is actually a consultation document. Rather more sensibly, the shadow Business Secretary yesterday applauded the new housing initiatives. We will proceed with the consultation, and if the shadow Chancellor has any technical criticisms of the tenure arrangements, he can make them in the consultation process and we will listen constructively.
Mr Chuka Umunna (Streatham) (Lab)
With the greatest respect to the Business Secretary, he mentioned what I said yesterday, but I said that not knowing that people who want second homes can take advantage of the scheme. He did not know that either.
Vince Cable
The Opposition Front Bench is getting a little silly. Let us leave it to the consultation and see what comes out. I am sure that those imaginary horrors will not be realised.
The second criticism from the Opposition was about the level of borrowing. I was not clear whether the shadow Chancellor regards high levels of borrowing as a good or bad thing—a rather basic question. Is the Labour party in favour of more borrowing, or less? The Institute for Fiscal Studies made a thorough comparison between what is likely to happen under the Government’s fiscal plans and what would have happened under the so-called Darling plan. It was a bit perfunctory, but it gave us a framework and concluded that in 2016-17 the level of borrowing under the Labour trajectory would have been £76 billion, but £24 billion under the coalition’s policy. That is after the revisions that have taken place.
As someone brought up in the Keynesian tradition, I think it rather creditable that the Chancellor has responded to a slow-down in the economy by allowing counter-cyclical stabilisers to apply. I am amazed that those on the Opposition Front Bench find that a source of criticism, when it is good, common-sense, practical economics.
Vince Cable
Job creation in the north-east is growing more rapidly than it is in many other parts of the country. It is precisely because the north-east has a higher share of exports in its regional gross domestic product than any other region that it is benefiting from the shift that is now taking place to manufacturing.
Mr Umunna
The Secretary of State says that the Government have made a mistake with their capital spending cuts and that they are reversing them— presumably, he refers to the extra £3 billion. However, why are he and his colleagues reversing the mistake only from 2015, when the economy needs the support now?
Vince Cable
I answered the hon. Gentleman’s point in Business, Innovation and Skills questions. Some of the increases in capital spending have already taken place. There was a significant increase in the capital outlay on universities, which my colleague the Minister for Universities and Science is seeing through at the moment in the establishment of R and D centres. After the fiasco of further education college building under the previous Government, the current Government are, in a systematic way, restoring the infrastructure of the FE sector.
Business and the Economy
Chuka Umunna Excerpts(12 years, 7 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Vince Cable
I agree with the hon. Gentleman that we want banks to lend to small businesses, and one of the sources of finance, as identified recently in the Breedon report, which my Department commissioned, is big companies at the top of supply chains financing their own suppliers. They should do more of that, and we have introduced a programme, with some Government funding, to enable that to happen on a much bigger scale.
Mr Chuka Umunna (Streatham) (Lab)
Project Merlin failed, and we were told that credit easing and the national loan guarantee scheme would resolve small businesses’ problems in accessing finance. What does it say about those schemes that, since they were introduced, Wonga has seen fit to enter the market for lending to small and medium-sized enterprises?
Vince Cable
Nobody ever argued that the credit easing scheme would solve the problem of small business lending. We argued that it would cheapen the cost, and that will happen. All the major banks are now engaged in arranging packages to enable those lower costs to be passed through. I think the hon. Gentleman will be pleasantly surprised by the take-up within a few months.
Mr Chuka Umunna (Streatham) (Lab)
Thank you, Mr Speaker. I shall try to achieve that aim.
In responding to Her Majesty’s Gracious Speech, let us first take stock of the state of our economy and British business. Following the 2008-09 financial crash, born in the banking sector, to which the Secretary of State has already referred, the economy went into recession, like many others around the world, but thanks to the action that Labour took in office, we prevented that recession from turning into a depression and got the economy growing again. In so doing, we ensured that the pain of recovery was shared fairly, so that those with the broadest shoulders bore the heaviest burden.
When the Conservatives and Liberal Democrats took office, unemployment was falling, the economy was growing and the recovery was settling in. Consequently, borrowing in the last year of the Labour Government was £20 billion lower than forecast, because our approach was working. Today, the UK economy has not grown since the Government’s spending review, unemployment has soared beyond 2.6 million and 50 businesses are going under every single day. As a result, we are now in a double-dip recession created by this Government, and what is more, they are borrowing £150 billion more than forecast to pay for their failures. And who is bearing the burden of their policies? While taking tax credits away from families who want to stay off benefit and in work, they have given a tax break of more than £40,000 to millionaires. So they are unfair and out of touch as well as incompetent.
At the ballot box a couple of weeks ago, the public made it clear what they thought of the policies of the two governing parties. This is what the Business Secretary said about that vote of no confidence a couple of days after his party’s drubbing:
“as a party we’ve got to maintain our identity, we’re going to work in the coalition but by the time we get to the election we’ll be an independent force with our own values competing independently and I think those are the elements that will form the basis of our recovery.”
For all the murmurings of discontent from the Secretary of State, for all the attempts at differentiation and threats to press the nuclear button, the simple fact is that he, the Chief Secretary to the Treasury, sitting next to him, and their Liberal Democrat colleagues have all facilitated and voted for the things that their Government are doing but which are holding back our businesses and economy. They have waved through—more often than not, enthusiastically—all those things that the public made it clear they disliked a couple of weeks ago. For the avoidance of doubt, then, the Conservative’s out-of-touch and unfair economic policies are the Liberal Democrats’ unfair and out-of-touch economic policies; and the Prime Minister and the Chancellor’s incompetence is the Liberal Democrats’ incompetence. No amount of differentiation or smoke and mirrors will change that now or by the general election.
Michael Fallon (Sevenoaks) (Con)
I thank the shadow Secretary of State for giving way so early in his speech. Does he not recall the Governor of the Bank of England describing the Government’s economic policy as a “perfectly sensible” “textbook response”? Why is the Governor wrong and he right?
Mr Umunna
In case the hon. Gentleman has not noticed, we are in a double-dip recession. That says something about his party’s policies, given that, as I have just said, it inherited an economy that was growing, unemployment that was falling and a recovery that was setting in.
Before the Queen’s Speech, there was, of course, the Budget. Let us remember what people said about it. The general secretary of the TUC said:
“We needed a Budget that looked to the future and made jobs - particularly for young people - the national priority… Instead we have got a Budget by the rich for the rich.”
The chief executive of the Forum of Private Business said:
“what small businesses and the economy need are confident strides forward now. Largely, that has not happened in this Budget.”
People were looking in the Queen’s Speech for signs that Ministers understood what people were telling them—to change course and to put in place policies that will deliver an economy that works for working people and businesses, and the building blocks upon which a new economy can be built.
Did the Queen’s Speech deliver the change that people and businesses signalled they wanted to see? There are things that we welcome, subject to the small print being worked through. I have given the Business Secretary credit for ensuring that the Government established the Independent Commission on Banking. We are playing our part, in a cross-party spirit as far as possible, to implement its recommendations, and will look at the detail when it is published. The Government, by their own admission, said that they were bequeathed one of the best competition regimes in the world by this party. The Business Secretary will need to demonstrate that the creation of the single competition and markets authority—which he has just spoken about—will improve on that legacy, not squander it.
Our 2010 manifesto included plans to create a supermarkets ombudsman to protect farmers and food suppliers from unfair and uncompetitive practices by major retailers. The Government are taking that forward through the grocery adjudicator, which the Secretary of State has mentioned. We will work to ensure that the grocery adjudicator is given powers to ensure fair access across the supply chain. In office we set up the primary authority scheme—which he also mentioned—to help reduce the local regulatory burden on firms. The enterprise Bill will extend that to include more businesses, which is welcome. The Secretary of State also referred to the changes to parental leave. Again, we will look at the details, but on the whole, that does not sound like a bad measure.
We were told that the enterprise Bill would contain measures on executive remuneration—something the Secretary of State has just repeated. In order to build a more productive and responsible capitalism, it is important to ensure that we bring an end to rewards for failure and the excessive pay we have seen, which is bad for our economy and our businesses. On both sides of the House we agree that change and reform must be led by shareholders and investors with Government support. In office, we were the ones who introduced the advisory shareholder votes on remuneration reports, which have been causing a lot of news recently.
Mr Redwood
What approach would the shadow Minister recommend to the remuneration of senior executives and directors in banks with state shareholdings?
Mr Umunna
I would say that their pay should be linked to performance against criteria and specified objectives. Our argument in relation to RBS is that the Government are the biggest shareholder. They have lectured others about the need for greater shareholder activism, but it would be good to see it from those on the Government Front Bench.
However, despite all the things I have welcomed, in sum, it is business as usual for this Government. This Queen’s Speech signals little change in approach. For the person looking for work, this Queen’s Speech offered no hope; for individuals, families and firms faced with increasing energy and water bills, and rising transport costs, it offered no hope; and for sound and successful small businesses struggling to get by in this recession of the Government’s making, it offered no hope. However, listening to the Business Secretary, one would think that the Queen’s Speech had been positively received. I do not know who he has been listening to, but this is what our business leaders have said about his Government’s Queen’s Speech. On Friday, Justin King, the CEO of Sainsbury’s and a member of the Prime Minister’s business advisory group, which is meeting as I speak, said:
“Consistency is what gives confidence. Unfortunately, what we have seen over the past couple of years is something that could not be described as a consistent pursuit of a clear policy”.
In other words, uncertainty—created by the Business Secretary’s Department and all across Whitehall—is reducing businesses’ confidence to invest for the long term. On Saturday, the director general of the British Chambers of Commerce said:
“there is a big black hole when it comes to aiding businesses to create enterprise, generate wealth and grow”.
Business people are clear: what they want is a Government who will step up and work in partnership with them to create the conditions for private sector growth. What they have got is a Government who step aside and leave business to struggle on alone.
What was the Government’s response to those comments by business people? Step forward the Foreign Secretary. Yesterday—in what the Business Secretary described as “commercial diplomacy”—he said:
“I think they should be getting on with the task of creating more of those jobs and more of those exports, rather than complaining about it. There’s only one growth strategy: work hard”.
What on earth does the Foreign Secretary think this country’s business owners do all day? His message is clear. He is saying that the fact the economy is not growing has nothing to do with the Government’s failed economic policies. He is saying that it is not growing because the people in all our businesses out there are not working hard enough. How out of touch can the Foreign Secretary be?
Mr Evennett
Does not the shadow Minister feel guilty that, under the last Labour Government, of whom he was a big supporter, there was high taxation, a great deal of regulation and red tape and a lack of a trained work force? The Labour Government never helped small and medium-sized businesses; nor did they allow reward for success.
Mr Umunna
I say to the hon. Gentleman that I am proud to be a shadow Minister for a party that saw 1.1 million new businesses created during its time in government. I am proud to be the shadow Business Secretary for a party under whose Government Britain was rated the best place for doing business in Europe and fourth best in the world. I must also remind him that the UK has fallen from fourth to seventh place on his watch.
Nicholas Soames (Mid Sussex) (Con)
Would the hon. Gentleman accept that the Foreign Secretary was saying that we have to do better with our exports? We have done much better this year, as the Secretary of State pointed out, through our commercial diplomacy, and the hon. Gentleman is wrong to sneer at that. It is a fact that we do not export nearly enough from this country, or nearly as much as we could.
Mr Umunna
If only the Foreign Secretary’s comments had been limited to those that I have just cited. There was more, however. Asked whether they amounted to a modern-day call to our people to get on their bikes, echoing the call from the noble Lord Tebbit back in the 1980s, the Foreign Secretary said:
“Well no, it’s more than that. It’s ‘get on a plane, go and sell things overseas’…It’s much more than getting on the bike. The bike didn’t go that far. ‘Get on the jet.’”
I know that senior members of this Government have a penchant for hanging out with people who own yachts and jets, but most business people in this country do not have those things or mix in such company. Chris Romer-Lee, the director and co-founder of an award-winning architecture practice here in London, said to me yesterday that his firm is working flat out and has been doing so through these bad economic times. He said that
“to suggest we could work harder is insulting.”
That is what a business person said to me yesterday.
Julian Smith
The legislation that we are discussing today deals with deregulation. Will the shadow Business Secretary tell us about his proposals to lift the burdens on British business?
Mr Sheerman
Before my hon. Friend leaves the pronouncements of the Foreign Secretary, I want to ask him whether he heard Lord Digby Jones speaking on Radio 4 this morning of the Government’s decision to “decimate” and “cut” UK Trade & Investment—the trade and investment arm of the Foreign Office. Is not that a reflection on the Foreign Secretary, who is not working very well or very hard himself?
Mr Umunna
I think that UKTI needs to do a hell of a lot better, as my hon. Friend suggests. Actually, I think that this Government need to work a hell of a lot harder before they start lecturing others. It is not that we disagree about the need to increase our exports, but let us take a step back. The Government’s economic policy is one of expansionary fiscal contraction. Their idea is to hack off parts of the public sector and take away things that the Government do, and they expect the private sector automatically to step in and fill the gap. I do not think that telling business people that they are whingeing and not working hard enough is a way to inspire them to do what the Government expect of them.
Ian Paisley (North Antrim) (DUP)
Was the hon. Gentleman as perturbed as I was, two weeks before the Gracious Speech, to hear another Cabinet Minister suggest that he wanted to put a certain industry out of business? That industry raises £12.5 billion a year for the Exchequer in customs and excise duty payments. Will the hon. Gentleman defend the tobacco industry, which employs 6,000 people in this country and generates millions of pounds in PAYE and revenue for the Government?
Mr Umunna
We want all those sectors that have a competitive edge to have a comparative advantage for this country, providing jobs and opportunities when more than 2.6 million people are out of work. We want to see those sectors thrive.
Given the recent omnishambles, one would have thought that Ministers might stop and think before attacking those to whom they look to grow our economy. Far from it, however, as so far we have mentioned only the Foreign Secretary. The Secretary of State for Communities and Local Government also waded in to the row, in typical diplomatic fashion, saying that he agreed with what the Foreign Secretary had said, while the Defence Secretary—it is a shame that he did not stay in his place after his statement—then accused businesses of being whingers. The problem is that Ministers seem to inhabit a different planet from the rest of us. It is not that our businesses are not working hard enough; it is that there is a lack of demand and weak confidence flowing from the Government’s mismanagement of the economy, which has helped to tip us into a double-dip recession.
Joseph Johnson (Orpington) (Con)
Does the hon. Gentleman recognise that UK gilt yields are at an historic low, and that we would be taking a tremendous risk with them if we moved away from an economic policy that no less a person than the Governor of the Bank of England has described as the “textbook response” to the situation this country faces?
Mr Umunna
That quote has already been used. I would say two things to that. The hon. Gentleman, who studies these matters keenly as a writer for The Financial Times, will know that Christine Lagarde, the head of the International Monetary Fund, has said that to have a credible fiscal policy, we need growth. The problem is that there has been no growth since the comprehensive spending review. Secondly, we have had historically low interest rates on our sovereign debt and, of course, we control our own monetary policy, which has helped matters.
Mr Umunna
I am not saying that the Governor of the Bank of England was wrong. What I am saying is that we need growth for a credible fiscal policy. Many, including Government Members, would not necessarily argue that the Governor has always been right, particularly during the 2008-09 crisis.
The people have spoken, our businesses have spoken, families up and down this country have spoken, but the Government do not want to listen, so they persist with the same failed economic strategy, the same failed approach, exemplified in their Finance Bill carried through from the last Session with its granny tax, caravan tax, pasty tax and tax break for millionaires.
What of measures to put in place the building blocks for our economy in the long term? Was any change signalled in this Queen’s Speech? The Business Secretary famously wrote to the Prime Minister and the Deputy Prime Minister about industrial policy, outlining his and their failures. He quite rightly argued in his letter for Government to adopt an industrial policy. He said he sensed that there was “something important missing” from what the Government were and are doing—and that was “a compelling vision” of where the country was headed beyond deficit reduction. He rightly said, too, that
“market forces are insufficient for creating the long term industrial capacities we need”
and that
“we should be willing to identify British success stories as identified through success in trade and explicitly get behind them at the highest political level.”
That is precisely what we did in government in respect of the automotive industry—and we are now reaping the rewards from that.
The problem for the Business Secretary is that the Chancellor and the Prime Minister do not buy into active government and industrial policy. To their names we can add that of the Foreign Secretary as another roadblock to the active Government and industrial policy that those who own and work in businesses want to see. What evidence is there in the Queen’s Speech that the Business Secretary has been able to exercise any influence over these roadblocks to bring about a change of approach? None whatsoever.
The Business Secretary’s letter identified our energy and low-carbon industries as an important sector. We are told—the Business Secretary mentioned it—that the enterprise and regulatory reform Bill will include provisions to set up the green investment bank, which is an essential component of an industrial policy for a low-carbon economy. According to conventional definitions, however, a bank is an entity that borrows and lends money. Given the absence of those capacities and capabilities, we are left not with a body that can be called a bank, but with a fund. That is the only proper name that we can give to this initiative. It is not planned to become a bank until 2016, and will do so then only if public sector net debt is falling as a percentage of GDP at that point, which is by no means certain.
Often cited by the Business Secretary as evidence of an industrial policy, or industrial strategy, is the regional growth fund, and that was exposed as a complete shambles by the independent National Audit Office on Friday. The Deputy Prime Minister and the Business Secretary have been going around the country boasting that the scheme will create half a million jobs. What did the National Audit Office tell us on Friday? Only 41,000 jobs will be created, and many of them would have been created in any event. The House will remember that the Government abolished the future jobs fund on the basis that it was too expensive. It was claimed that each job created from that fund cost £6,500. How much did the NAO tell us each of these jobs has cost us? Up to £200,000.
While I am at it, let me thank the Minister of State, Department for Business, Innovation and Skills, the hon. Member for Hertford and Stortford (Mr Prisk)—who has been chuntering from a sedentary position—for the letter that we all received from him inviting us to encourage businesses in our constituencies to bid for RGF money last week. In that letter, he said
“my officials are ready to help”
and
“there will be plenty of opportunities for bidders to meet the appraisal team to discuss their ideas before the bidding deadline”.
There is, of course, a small snag. The NAO told us that the fund started off with 12 economists seconded from other Departments to process these matters. They all returned to their home Departments before due diligence on the first round of bids began, and the fund had no dedicated administration budget. Let us hope that there are some officials left for us to see.
Tristram Hunt
When it comes to industrial policy, is my hon. Friend as worried as I am by the lack of a strategy for intensive energy users in the Government’s plan? There is nothing in the Queen’s Speech, or in the Budget, to protect our steel and ceramics industries, which are vital to a low-carbon future.
Mr Umunna
My hon. Friend is right. I know that his constituency contains some of those industries.
The Government refuse to heed the call of businesses to get our economy going, and they refuse to adopt the active industrial strategy that we need. Instead, we have a Chancellor who is seeking to play the same old Tory tunes and watering down employee rights as a substitute for a proper growth strategy, along with a Business Secretary who is at best seemingly powerless to stop the Treasury juggernaut, and at worst going along with its nonsense on employee rights. We do not yet know what form the changes to employment law contained in the enterprise and regulatory reform Bill will take. All that we have been told to date by the Business Secretary’s Department is that the Bill will
“Overhaul the employment tribunal system, and transform the dispute resolution landscape.”
The Business Secretary alluded to that earlier. However, reforming the employment tribunal rules of procedure is one thing; making it easier for companies to hire and fire their workers, as the Government have spun it in the media, is quite another.
In March, the Business Secretary told the House that we already had the most flexible labour market in Europe, a claim that he repeated today. He also said that ours was the second most flexible labour market in the OECD. However, in an opinion piece which appeared in The Telegraph on 7 May and which was referred to by the hon. Member for Stone (Mr Cash), there was the Business Secretary parroting his Tory masters’ line.
“Britain is no longer a lone voice in the push”
for an even more “flexible labour market”, he told us. He then proceeded to round on the working time directive, which he condemned for being “'wasteful”. What has happened in the interim? Why the change of tone? I think that the Business Secretary has been got at.
Let us consider what the working time directive does through the working time regulations that give it effect in UK law. It ensures that workers have at least 11 hours’ rest in any 24-hour period. It ensures that workers have one day off in any seven days. It guarantees four weeks’ paid leave a year, and the right to a rest break of at least 20 minutes during a working day of six hours or more. I know that Ministers do not think we are all working hard enough, but I did not envisage that they would seek to tamper with those basic rights to a modicum of time off and a rest.
Vince Cable
Is the hon. Gentleman not aware that the individual opt-out of which I was speaking was defended for over a decade by the last Labour Government?
Vince Cable
If the hon. Gentleman is following this matter closely, he will know that there has been a series of judgments by the European Court of Justice that, unless repealed, will add very considerably to the burdens faced by companies, and that that was fully recognised by his party when it was in office.
Mr Umunna
So, in contrast to what seems to be in the Secretary of State’s Telegraph piece—I have a copy of it to hand—he has no problem with the working time regulations; instead, he simply has a problem with ECJ cases. [Interruption.] For the benefit of the record, the Secretary of State is saying he does not have a problem with the working time regulations. So why on earth is he publishing an article in The Telegraph saying
“the tide is turning against EU bureaucracy”
and
“Britain is no longer a lone voice in the push for deregulation”?
Who is that designed to please?
The reason we are in recession is not our employment law regime; it is this Government’s policies. [Interruption.] The Chief Secretary chunters from a sedentary position about the Labour Government. He has been in power for two years now. When he became Chief Secretary to the Treasury, he inherited a situation in which, as I said at the beginning of my speech, growth was rising, unemployment was falling and a recovery was setting in. Now, after two years at the Treasury, he is presiding over an economy that is in a double-dip recession. We will take no lectures from him.
The reason our economy has not grown is not our employment regime; it is this Government’s policies. The Secretary of State should be working to make it easier for firms to hire people—for example, by giving all micro-businesses who take on extra workers a national insurance break—not enabling firms to fire people as they want, with all the instability that that brings.
So there we have it: a Government who have tipped this country into a double-dip recession; a Government who will not listen, or take responsibility for the mess they have created; and a Government who tell our businesses and everyone else to work harder. Yet it is they who should change course and work a lot harder to provide the policies and leadership this country deserves and needs.
Danny Alexander
The hon. Lady has made an important point about the use of European regional development funding, which we have been considering in connection with the regional growth fund. I am afraid that I cannot give her an update on funds for the north-east, but I will ensure that the Minister responsible for such matters writes to her with one.
Mr Umunna
The facts that I gave earlier about the regional growth fund came straight out of the National Audit Office report. Am I right in saying that the Chief Secretary has denied that the report said that only about 41,000 jobs could be created under the scheme? Was I also wrong in stating that the report was very clear about the fact that, in some cases, the cost of each job would be up to £200,000?
Danny Alexander
If the hon. Gentleman will stop heckling from a sedentary position and listen to the answer for once, I will do my best to deal with his question.
In the individual case in which the £200,000 figure was given, it was given before the due diligence phase, as a Member whom I could not identify has just pointed out from a sedentary position. If the project reaches its final stages, it will involve a cost per job much closer to the average. The 41,000 figure was a mechanical estimate for which a model was used, whereas the 328,000 figure that I gave is based precisely on information provided by successful applicants on the number of jobs that will be created and safeguarded by the regional growth fund. I think that, rather than sneering at the fund, the hon. Gentleman should recognise the important contribution that it is making, and the important contribution to economic recovery that is being made by the private sector businesses that it is supporting.
Danny Alexander
I will give way once more, but then I must make some progress.
Danny Alexander
I do not have that information to hand. However, the point I made earlier, which he ignores, is that in many cases where the regional growth fund has been awarded, the private investment takes place well in advance of the public funds being needed. The measure he seeks to use of who has received public funds is therefore not necessarily the best measure of the investment that has taken place, quickly stimulated by the award of regional growth funds. If he looks around the country, he will see many examples of private sector businesses that have been awarded moneys from the regional growth fund and have started their investments well in advance of public funding arriving, because that is how their projects have been planned. If he were doing his job properly, he would understand that that is the way in which many businesses operate.
We have also heard a number of comments about the banking Bill. Indeed, strong support for that Bill was expressed on both sides of the House, and there was support, too, for the strong recommendations of the Independent Commission on Banking.
Banking (Responsibility and Reform)
Chuka Umunna Excerpts(12 years, 10 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mr Chuka Umunna (Streatham) (Lab)
I beg to move,
That this House notes with concern that the recent Bank of England publication, Trends in Lending, shows that net lending to businesses has fallen in nine out of the last 12 months and by more than £10 billion in the last year; further notes that a Department for Business, Innovation and Skills report published on 2 February 2012 states that the stock of lending to small and medium-sized enterprises peaked in 2009 and in November 2011 declined by 6.1 per cent. compared to November 2010, whilst banks were frequently setting bonuses for their senior executives which were too large; believes that bank executive remuneration should be related to performance and that banks either directly or indirectly supported by the taxpayer must recognise that the taxpayer expects very large bonuses only to be paid to reflect genuine exceptional performance; notes with concern that the Government has not given due consideration to repeating the bankers’ bonus tax, in addition to the bank levy, to pay for 100,000 jobs for young people; calls on the Government to increase transparency, accountability and responsibility in the setting of pay in the banking sector, including through the immediate implementation of the Walker Review on corporate governance, and the placing of an employee representative on the remuneration committees of company boards; and further calls on the Government to reform the banking sector so that it better supports businesses and provides the credit they need to create jobs and growth.
I should like to take this opportunity to tell the House that I have been informed that the Business Secretary is not able to be here today because he is at a funeral. I am sure that the whole House will want to join me in wishing him well on this sad day.
The subject of the motion, responsibility and reform in the banking sector and in the wider economy, has been a matter of immense public interest of late and is one on which many Members have already spoken out. Let us be clear—I think I speak for most Members when I say this—that in speaking out on these issues hon. Members simply reflect the strong views expressed by our constituents on the subject.
The Labour party’s starting point is this: we are proud of our financial services centre, the City of London being arguably the world’s leading financial services centre. I, my hon. Friend the Member for Leeds West (Rachel Reeves), the shadow Chief Secretary to the Treasury, who will make the Opposition’s winding-up speech, and many other Members are, I know, proud to have spent time working in the City of London before being elected to this place.
The City helps to give the country a competitive edge, thanks to the talent that we have here, our time zone, our company law, our jurisdiction and the free flow of capital in London. The financial services sector as a whole employs more than 1 million people nationally and makes up 10% of our total national income, but no witness to recent history could claim with credibility that the sector has functioned as British businesses, our economy and our society as a whole would have wanted over the past few years.
Ultimately, the fault for that lies with a minority of those working in the sector, but as the party in government through much of that period we, along with others in power throughout the world, must, and we do, accept with humility that we should have better regulated the sector, because dysfunction in the banking sector here and globally led to the financial crisis of 2008-09, to the recession that followed and to its aftermath. That recession, the gestation of which is found in the banking sector, is something for which the British people are still paying.
Keith Vaz (Leicester East) (Lab)
My hon. Friend will be aware that the current structures were set up following the closure of the Bank of Credit and Commerce International 20 years ago. There remain within the Treasury the confidential parts of the Bingham report. Does he think that it is time that those confidential parts were published? That would give us a better understanding of exactly what went wrong in the biggest collapse of a bank in British history.
Mr Umunna
I agree with my right hon. Friend. I know that that is something for which he has campaigned for a long time.
We all know the facts. From the middle of 2007, the losses sustained on securities backed by sub-prime mortgage assets led to a credit crunch. That credit crunch came about due to a loss of counterparty confidence and uncertainty about which financial institutions held toxic assets. Depressed asset prices and increased losses led to serious solvency issues in major banks here and in the United States.
In the US, Bear Stearns had to be rescued by J. P. Morgan, Lehman Brothers collapsed, and AIG was nationalised in 2008 by that well known socialist, the 43rd President of the United States, George Bush. Here, Northern Rock had already been nationalised by the Labour Government by 2008. Later that year, we put in place a £500 billion package of measures designed to recapitalise the banks. That included the special liquidity scheme and inter-bank lending guarantees. The Labour Government took stakes in two of our biggest banks so that, by the end of 2009, the Government held a stake in Lloyds of just over 40% and a stake in RBS that increased to more than 80%.
For all the criticism that is often heaped on my right hon. Friends the Members for Edinburgh South West (Mr Darling) and for Kircaldidy—sorry, for Kirkcaldy and Cowdenbeath (Mr Brown)—by Government Members, I believe that we owe a debt of gratitude to them both for the decisive action that they took to save the system from itself, to secure people’s savings and to ensure that the people we represent could continue to withdraw money from cash machines in the wall. The Opposition are proud of what they achieved.
As the Independent Commission on Banking stated:
“without the intervention of national authorities around the world—requiring taxpayers to incur significant direct costs and larger contingent liabilities—the consequences of the crisis would have been immeasurably worse.”
It is for that reason that this House has every right to take an interest in remuneration and reform in the banking sector. After all, our banks still benefit from an implicit taxpayer subsidy if they fail.
Stephen Mosley (City of Chester) (Con)
The Financial Services Authority blamed political pressure for the failure of RBS. Is the hon. Gentleman saying that the FSA is wrong?
Mr Umunna
I do not believe that that is what the report on RBS said. I did concede earlier that the Opposition accept that, in office, we should have better regulated the sector. I also think that Government Members who urged us towards a light-touch regulatory regime should accept that they, too, were mistaken.
John Robertson (Glasgow North West) (Lab)
Does my hon. Friend agree with me and some of my constituents who have been in touch that the one thing that is lacking in the current crisis is leadership? That was not the case a few years ago when my right hon. Friend the Member for Kirkcaldy and Cowdenbeath (Mr Brown) led the way.
Mr Umunna
I agree with my hon. Friend and thank him for correcting my pronunciation of the constituency of my right hon. Friend the Member for Kirkcaldy and Cowdenbeath.
It is worth taking our minds back to the months leading up to April 2009, when the former Prime Minister went around the world galvanising support and encouraging people to attend the summit. It is worth noting that President Obama of the United States was not planning to attend the G20 conference in London, but in the end many people came here and the conference achieved great things and helped to secure the system. That was, indeed, leadership.
Mr Marcus Jones (Nuneaton) (Con)
The hon. Gentleman is telling the House about the record of the previous Prime Minister, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown). Does he think the previous Prime Minister showed good leadership by recommending Fred Goodwin for a knighthood and giving him a £700,000 pension?
Mr Umunna
We have said that, if we had known then what we know now, we would not have knighted Fred Goodwin. However, I say to the hon. Gentleman that the future of the banking sector is bigger than the individuals who have featured in the headlines of late. It is important that we debate what happens in the sector as a whole rather than focusing on Fred Goodwin and other individuals, important though it is to make points about them.
Mr Barry Sheerman (Huddersfield) (Lab/Co-op)
As we are examining history—some Government Members do not like to hear accurate history—I point out that Lord Burns was the Chairman and I was the deputy Chairman of the pre-legislative Joint Committee that considered the financial services Act. I remember that very clearly indeed, because it took us many months and was the first time there had been a joint Lords-Commons pre-legislative inquiry. The context was bitter resentment from the banks, which tried to water down the Bill, and no help from the people who led the Conservative party.
Mr Umunna
I presume that my hon. Friend is referring to the Joint Committee that considered the Financial Services and Markets Act 2000. The consensus at the time was shown in the approach instilled in the Act, and we are now revisiting the regulation of the sector.
The crash was global in nature, and the causes cited by the Independent Commission on Banking include declining underwriting standards, the mispricing of risk, a vast expansion of banks’ balance sheets and rapid growth in securitised assets—in short, gross irresponsibility. The commission also stated in its report that one problem was that some bank employees were remunerated
“on the basis of reported profits that were neither time-adjusted nor risk-adjusted, and led to employee incentives that were not always aligned with the long-term interests of the bank.”
The US financial crisis inquiry commission established by President Obama, which reported last year, went further, stating:
“Compensation systems—designed in an environment of cheap money, intense competition, and light regulation—too often rewarded the quick deal, the short-term gain—without proper consideration of long-term consequences. Often, those systems encouraged the big bet—where the payoff on the upside could be huge and the downside limited.”
Debbie Abrahams (Oldham East and Saddleworth) (Lab)
Does my hon. Friend agree that we should not demonise one group in society, whether they be bankers or benefit claimants? This is about fairness. We know from recent evidence that fairer societies are better for everybody, improving life expectancy and increasing social mobility. We should use that evidence to inform policy that is principally about fairness.
Mr Jim Cunningham (Coventry South) (Lab)
The Conservatives always tried to rewrite history when they were in opposition, but the truth is coming out now. Even Polly Toynbee, who was the biggest critic of my right hon. Friend the Member for Kirkcaldy and Cowdenbeath (Mr Brown), has now forgiven him and wishes he were back.
More importantly, if the man or woman in the street who goes to work every day fails in their job, they get the sack. No one but a banker would ever be rewarded for failure, but we now have a culture in this country of rewarding failure. Surely that must be wrong.
Julian Smith (Skipton and Ripon) (Con)
Will the shadow Minister confirm that at that time he was an employment lawyer and was involved in structuring the compensation packages of investment houses? Does he have any regrets about how he behaved at the time?
Mr Umunna
I am glad that the hon. Gentleman brought up that point, because I anticipated it. First, I think it is good that Members of this House have experience in working for business. Secondly, my experience of advising different companies and financial institutions on such arrangements has convinced me that we must reform the way in which the system works—[Interruption.] I would also say to Ministers, who are crowing, that they might wish to reflect on the fact that my ultimate boss at the time when I was more deeply involved in drafting such arrangements was the senior partner of Herbert Smith, whom the Prime Minister ennobled in the first tranche of peers at the beginning of this Parliament—no doubt because of his services to the legal profession and the City of London.
As the Leader of the Opposition said last week, we are still dealing with the aftermath of the moment to which I have referred and the recession it caused. Many thousands of people lost their jobs and now face the biggest squeeze on their living standards in a generation. Thousands of robust, profitable businesses have struggled to access finance or have gone under. At this juncture, I want to tackle head on the accusation that to raise those issues and criticise the financial services sector is to be anti-business—some have even referred to it as indiscriminate business bashing. That is an utterly absurd notion given that among the most vociferous critics of our banks are the small and medium-sized businesses that make up the overwhelming majority of businesses in this country. The people making those outlandish claims of anti-business sentiment talk as though large financial institutions are the only businesses in this country. Yes, those institutions are an important part of our business community, but there is so much more to British business than big finance. Indeed, we need to rebalance our economy not to diminish our competitive edge in financial services but to grow other sectors so that we are not so reliant on that one sector.
Businesses in other sectors are struggling right now. The most recent Bank of England trends in lending show that net lending to businesses has fallen in nine out of the past 12 months and lending has fallen by more than £10 billion in the past year. A report published by the Department for Business, Innovation and Skills last week states that the stock of lending to small and medium-sized businesses declined by 6.1% in November 2011 compared with a year earlier.
It is not just that the banks are failing to get the money out of the door to successful, profitable businesses with robust business models. There has been a move away from relationship banking, where banks saw it as their duty to get to know and understand their business customers properly. Yesterday, I met a number of successful export businesses in the home counties—businesses that help us pay our way in the world. I was told by the overwhelming majority that when it came to getting help from their banks to export and expand, their banks simply did not want to know.
Some have suggested that that is all the result of increased capital requirements on the banks, but Robert Jenkins, a member of the Bank of England’s interim Financial Policy Committee, told the Treasury Committee last month:
“Making the banks safer through greater resilience in their balance sheets and more capital does not, in and of itself, prevent additional lending.”
Despite all that, people and businesses have had to watch as billions in bonuses have been paid to bankers since 2008-09. It is worth stating that we are not talking about the sums earned by the average bank employee—the cashier, say, in a local branch—but about the enormous sums paid to investment bankers and a select few senior executives in the sector. Those bonuses have continued to be paid as a matter of course, regardless of the fact that many of the institutions, all of which directly or indirectly benefited from the interventions of the Government over the past five years and continue to benefit from an implicit subsidy, have been making thousands redundant, have seen their share prices and profits falling and have been found guilty of mis-selling payment protection insurance on a grand scale. To add insult to injury, Robert Jenkins, commenting on bank balance sheets, told the Treasury Committee:
“Every £1 billion of less bonus would support £20 billion of additional small business lending.”
It is no wonder that Sir Philip Hampton, the chair of RBS, himself said last week:
“Pay has been high for too long, particularly in the banks, particularly in the investment banks".
Mrs Anne McGuire (Stirling) (Lab)
Does my hon. Friend also accept that lower-paid staff in banks often took much of their bonuses in the form of shares? Not only have they lost their jobs, many have lost out in their pension savings.
Mr Umunna
My right hon. Friend makes a good point. We should, of course, spare a thought for the employees whom she mentions.
It matters because, as the Governor of the Bank of England said last month, people have seen an extraordinary squeeze in their living standards, but the institutions and bankers at the centre of the crisis that created those problems are not only not suffering a gigantic squeeze on their living standards but continue to get very high remuneration, in part because the taxpayer has been forced to step in and bail them out.
Stephen Barclay (North East Cambridgeshire) (Con)
Can the hon. Gentleman explain why, under the regulatory structure introduced by his Government, banks were able to hire staff on guaranteed bonuses totally unconnected with future performance, and why not a single individual in any of the five largest banks was subject to a fine? The two largest fines imposed on Northern Rock executives were less than the bonuses that they had received the preceding year.
Mr Umunna
On guaranteed bonuses, there is an element of contract in that, in terms of the arrangements between individual banks—[Interruption.] Will the hon. Gentleman listen and let me finish the point? There is an element of contract that provides for a bonus, but also an element of discretion. The fact that large bonuses were being paid out regardless of performance is, of course, what people outside Parliament object to.
Julian Smith
In order to create a balanced view, will the shadow business Minister confirm the tens of billions of pounds paid from those bonuses in income taxes and other taxes, such as employment taxes, during the period he is discussing?
Mr Umunna
Ultimately, the taxpayer had to put about £1.2 trillion into the system to support it. Juxtaposing that with the amount paid in tax by the sector, I am not sure that it comes to the same sum. I get the point that the hon. Gentleman is making. I do not deny that the financial services sector has contributed in tax receipts, but that is not outweighed by what we have had to pay out to save it from itself.
The status quo will not do. Change is essential. In November last year, Bob Diamond, chief executive of Barclays, said in his BBC “Today” business lecture that
“the single most important thing for banks and for businesses now is to focus on helping to create jobs and economic growth; and being able to do that requires us—banks in particular—to rebuild the trust that has been decimated by events of the past three years; and that rebuilding trust requires banks to be better citizens.”
I agree with Mr Diamond, but actions matter far more than words to people and businesses.
At the Business Secretary’s instigation, the Government established the Independent Commission on Banking, for which he deserves credit. If its recommendations are implemented, they will help to deliver a banking system that supports our economy’s interests in the long term. However, a number of things must happen to address the issues in the short term, not least of which is the matter of remuneration, which can be corrosive of public trust in our banks.
First, greater transparency on pay in the banking sector is needed. A good place to start would be immediate implementation of the Walker review. In 2009, Sir David Walker recommended new rules on the disclosure of bankers’ remuneration within pay bands above £1 million. In government, we legislated for that fairly modest scheme to be put in place so that irresponsible remuneration practices could be identified and rooted out. So modest were the proposals that the now Business Secretary told the House at the time that Sir David had produced
“an embarrassing mouse of a report”.—[Official Report, 30 November 2009; Vol. 501, c. 900.]
In the June 2010 Budget, the Business Secretary and his coalition partners pledged to take forward these modest proposals, but in November 2010 the Chancellor suddenly declared that he would not countenance implementation unless he could secure international agreement for the measures. In giving evidence to the Treasury Select Committee in December 2010, however, RBS’s Stephen Hester indicated that unilateral adoption of the Walker review proposals would not put the UK financial services sector at a significant disadvantage. Given the modesty of the Walker review proposals, why on earth will the Government not implement them?
Secondly, to increase accountability, we have said that an ordinary worker should be placed on the company remuneration committees setting pay. I do not understand why the Government have been so resistant to this idea. The Business Secretary has said that he is very sympathetic to the idea but has raised practical objections on the basis that there are many FTSE companies whose employees are predominantly overseas. These practical obstacles can be overcome, however, not least through technologies such as telephone and video conferencing, which in this day and age are a common feature of board meetings.
Mark Lazarowicz (Edinburgh North and Leith) (Lab/Co-op)
Having a worker on the board is not just about accountability. Would it not also address the fact that remuneration committees tend to comprise people much like the people whose salaries and bonuses they are assessing? It is not surprising, therefore, that they decide in favour of higher bonuses and salaries. That is another reason a different voice is needed on the committees.
Mr Umunna
I agree with my hon. Friend. First, an employee understands what is going on in the business—perhaps, in some respects, better than a non-executive director—and, secondly, employees have a stake in the business, and if the business fails, they ultimately pay the price, as thousands of RBS employees going through the redundancy process are now realising.
Mr Sheerman
I am certainly not against this sensible proposal to put employees on boards, but as I understand the Walker review and its recommendations, it does not meet the situation now. Instead of innovations, we need something so dramatic that we change the culture in our banking system and its understanding of what is right and wrong, as was mentioned earlier. The culture is what matters, but I see nothing coming from the Government that will fundamentally change the culture that motivates the people working in the sector.
Mr Umunna
Thank you, Mr Deputy Speaker.
I thank my hon. Friend for his contribution. The Walker review proposals are the start, not the end, of the reform needed, but my hon. Friend makes a strong point about the culture in the financial services sector. On the proposal to have an employee on the remuneration committee, would not the RBS board be in a stronger position if it could say, on matters of pay, that an employee representative had been involved in the decision making?
Richard Fuller (Bedford) (Con)
I am listening with great interest to the hon. Gentleman’s extended exposition on the failings of the previous Labour Government. It is nice to see him joined by so many for such an extended mea culpa. [Hon. Members: “Where’s the question?”] My question is this: does he think that the objectives of a company executive should be to maximise shareholder value for his business, to do the Government’s bidding or to do the bidding of a broader range of interests?
Mr Umunna
The hon. Gentleman asks a good question. Ultimately, of course, a director’s duty is to shareholders, but I take issue with those who suggest that the Labour Government did not introduce reforms, because we did introduce reforms, one of which was the Companies Act 2006, which changed the nature of company law so that other stakeholder interests could be accounted for. In some respects, though, shareholder interests are not necessarily completely separate from those of wider society. My strong view is that business and society are mutually dependent, and that goes for our banks as well. Banks rely on society to provide talent, skills and custom, and we rely on banks not only to perform a social utility function for individuals and businesses, but to provide growth and jobs. How does that relate to the hon. Gentleman’s point about shareholder value? If a bank fails its customers—as happened, for example, in the payment protection insurance scandal—that has a knock-on impact on reputation, which can ultimately have a knock-on impact on profit, which is against the shareholder interest.
Mr Umunna
I will move on, so that I can finish and others can get in.
What else needs to happen? The banks are accountable to their shareholders, and the Government have told shareholders to be more active. A starting point should be for the Government to practise what they preach in relation to their shareholdings in the publicly owned banks, particularly in the setting of pay and bonuses. It seems that their default position at the moment is that they do not want to get involved unless forced to do so. That has to change. More responsibility is needed. The public rightly expect the culture of excessive bonuses to stop. That means that bank executive remuneration that is described as performance-related should be just that: related to performance. Very large bonuses should be paid only to reflect genuinely exceptional performance, if trust in the system is to be maintained. The public expect the same of other organisations enjoying taxpayer subsidies. Network Rail—part of an industry backed by a £4 billion taxpayer subsidy—is a good example. It was planning to push through a new bonus scheme under which senior managers were due to receive 60% of their salaries as a bonus every year, and a further 500% at the end of each five-year funding period. That kind of bonus culture is unacceptable to people and difficult to fathom. Again, the Government did little to stop that, but in the end the Network Rail board saw sense.
Mark Lazarowicz
My hon. Friend is being generous in giving way. When bonuses are paid for performance, is it not also important that they should be paid for performance that is related to the activities of the people receiving them? They should not be bonuses that could depend on factors that have nothing to do with the activities of the directors concerned, as would have been the case with Network Rail.
Mr Umunna
I will move on.
Given that market mechanisms since the crash have not operated to rein in excessive pay in the banking sector, the bank bonus tax, we have argued, should be repeated, on top of the bank levy, in recognition of the fact that the banking sector owes a responsibility to society in general. If the claim that we are all in it together is to mean anything, the reintroduction of that tax is a must. It would create 100,000 youth jobs and 25,000 affordable homes. It would do immeasurable good to the reputation of the sector and support jobs, growth and business in the UK economy.
Mr David Ruffley (Bury St Edmunds) (Con)
I agree with some of the things that the hon. Gentleman has said, but the last Labour Chancellor said that
“it will be a one-off thing because, frankly, the very people you are after here are very good at getting out of these things”.
Those were the words of the right hon. Member for Edinburgh South West (Mr Darling) in autumn 2010. What has changed since?
Jack Dromey (Birmingham, Erdington) (Lab)
With house building down, homelessness up and nearly 2 million people on waiting lists for council housing, does my hon. Friend agree with the unemployed building worker in Erdington who said to me that the time has come to tax the bankers, build homes, put people such as him back to work, and create apprenticeships and hope for our young people?
Mr Umunna
I want to make a little more progress.
We need a more diverse and competitive banking system that is rooted in our communities and that better serves the financing needs of our businesses, as the Federation of Small Businesses and other organisations have argued. We need better developed equity finance, too, which is why we are exploring the possibility of creating in the UK something akin to the US Government’s small business investment company programme. That programme financed the likes of Apple and Intel in their early stages. We are also considering plans to set up a British investment bank that could step in if the market failed to provide for our entrepreneurs.
Mark Field (Cities of London and Westminster) (Con)
We all appreciate that this banking crisis has gone on considerably longer than we envisaged. In 2008, we probably all thought that we would have divested ourselves of our huge stake in RBS and Lloyds Banking Group by now. I therefore fully support the idea of a structure for bonuses that would come into play only when we have divested ourselves of our stake in those two banks. However, I get the impression from all that the hon. Gentleman has said that he draws no distinction between those two banks, in which we have large holdings, and the rest of the banking sector. Am I correct in that assumption?
Mr Umunna
No; partly because, whether we like it or not, the way in which the public regard RBS and Lloyds is different from the way in which they regard, say, Barclays or other banking groups, simply because of the public stake in them. That is the issue that crept up on members of the RBS board over the past couple of weeks. For all that was said about the terms on which the different executives and employees were joining RBS, they were essentially joining an institution that the public have very much come to regard as a public entity.
Mark Field
Is the hon. Gentleman therefore working towards putting in place a policy that would be more onerous for RBS and Lloyds Banking Group, in which the public have a large stake, than for the rest of the banking system? Does he feel that that would be a sensible way to go forward?
Mr Umunna
That is not actually what we are arguing for. We have said, given that the Government have been lecturing shareholders on being more active in relation to their shareholdings, that the Government should of course take a more active approach to those banks in which we have a stake. As has been pointed out, however, the sector as a whole needs a change in its culture; that applies across the board.
Right now, we need the Government to make good on their promise to implement credit easing, to relieve the credit squeeze on businesses. That plan was announced to great fanfare more than four months ago, but nothing has happened. I am glad that the Financial Secretary to the Treasury, the hon. Member for Fareham (Mr Hoban) will be responding to this debate. Perhaps he can tell us what has become of the scheme. The lack of speed with which the Government have proceeded with it is in marked contrast to the actions of the German and US Governments, for example. In Germany, KFW doubled the amount of small business finance available very quickly over the past couple of years through its lending programmes.
Some people suggest that if we do all these things, wealthy bankers will simply move abroad. We are for ever being held to ransom by that threat. It is notable, however, that many of those who put that argument benefit from the status quo. They have been making the argument for a number of years, but they are still here. They tend to ignore the fact that it is the banks’ shareholders—not just politicians and society at large—who are calling for reform. Shareholders such as Jupiter, F&C Asset Management and Legal & General have all reportedly told the banks to be sensitive to the popular mood, and to moderate pay rises to match sharp falls in shareholder returns. The Association of British Insurers is reportedly meeting all the banks at the moment, including Barclays. Those people also ignore the fact that bankers and executives in other countries are being required to change their ways. For example, our banks’ US rivals are cutting bonuses by up to 30% at the moment.
Mr David Hamilton (Midlothian) (Lab)
Where would those chief executives go? In Europe, they would get a lot less, and in America some chief executives have gone to court and even to prison. Perhaps they want to stay where they are because they feel safe here.
Mr Umunna
I am sure that many of those executives are watching the debate, and that they will pay attention to what my hon. Friend has said.
I will finish by returning to where I started. We are proud of our financial sector; it is an asset. We need it to help create the jobs and growth that are so lacking at present. All we ask is that it better serve the real economy in this endeavour—and that it does so more responsibly. With that in mind, I urge all Members to support our motion.
Mr Hoban
The reason we have to have the austerity programme in place is to tackle the mess left by the Labour party when it was in government.
As I was saying, we are seeking to reform the sector to ensure that it can lend to businesses in the long term, but we have also taken decisive action to stimulate credit in the short term. That is why the Government secured an agreement with the UK’s largest banks to provide £190 billion of new lending to business in 2011. By the third quarter of last year, those banks had loaned more than £157 billion to UK businesses, which is 11% above their implied target. That includes £56 billion of lending to small and medium-sized enterprises—10% higher than at the same point in 2010.
I noted that during the rather long speech of the shadow Business Secretary, he talked about lending but put forward no ideas about how Labour would tackle it, yet we in government have taken action to get the banks lending to businesses and to make sure that there is a supply of creditors to SMEs.
Mr Umunna
I am grateful to the Minister for giving way. I have to say that many of the organisations that represent our SMEs will listen with incredulity to the Minister’s suggestion that credit conditions are somehow all fine and that all is well. The fact is that, according to the Bank of England’s latest figures, we have seen a net contraction in lending to SMEs in nine of the last 12 months. It is clearly still a problem. In fairness, the Government announced that they were going to provide some credit easing—admittedly when the Chancellor said so in his speech to the Conservative party conference, although I never quite understood what he was talking about—but so far we have seen absolutely no action. When will this credit easing system come into effect?
Mr Hoban
I had hoped that the hon. Gentleman would come up with some ideas, yet he took a rather lengthy intervention to demonstrate that Labour has no ideas about what to do. Let me set out some of the structural measures we are taking to tackle the supply of debt and equity finance to businesses, and SMEs in particular. We are continuing the enterprise capital funds, and we are simplifying and refocusing the venture capital trusts and enterprise investment scheme to encourage more equity investment in start-ups.
Mr Umunna
Will the Minister at least concede that this issue and the kind of perverse incentive structures we have heard about, with rewards for failure and excessive pay in the boardroom and the City, have grown over the past three decades under different Governments of different colours? Will he have the humility to accept that?
Stephen Williams
My hon. Friend makes an interesting philosophical point about the whole culture that we have perhaps all grown up in over the past 30 years. It would require more than an eight-minute speech in a three-hour debate to deal seriously with those issues, but I am trying to raise some of them. For instance, when considering how to respond to the outbreak of collective madness on the streets of some of our cities last summer, we should recognise that some of what he says is relevant to the feelings of dislocation and despair that some people felt, but it was also about out-of-control remuneration, lax regulation and complacent political oversight. Opposition Members do not like me saying this, but I say it every time and will say it again: a previous Labour Business Secretary, Peter Mandelson, said that new Labour was intensely relaxed about people getting filthy rich. Because of that, we saw the dislocation of director and shareholder interest.
Stephen Williams
No, because I have given way twice and I have a time limit, and the hon. Gentleman took rather a long time making his opening speech.
All of this happened under the previous Government, and the coalition Government are now having to clear up the mess. We have heard once again that all that is needed is the magic wand of the bankers bonus tax but, as my hon. Friend the Minister has pointed out, in every year of this Parliament, under the coalition Government, more money will be raised—£2.6 billion—from the permanent levy on the banks’ balance sheets. It is the behaviour of the banks, and their boards in particular, that needs to change, rather than necessarily the pay and remuneration of their employees, which I remind the House is now taxed at a higher rate than it was when Labour was in government.
The behaviour in the boardroom needs to change, especially in the remuneration committees. As I understand it, the Walker report, which is mentioned in the Opposition’s motion, simply recommended that remuneration of bank employees over £1 million should be disclosed in broad pay bands, which is hardly revolutionary.
The Merlin agreement, an interim measure while we await the implementation of more wide-ranging banking reforms, now states that a bank’s five highest-paid executives, as well as its chief executive and chairman, have to disclose their remuneration, so at least seven people each year now have to do so. That is the highest number in any global financial centre and more than in the United States, and, as the Minister pointed out, bonuses at the banks that are under effective state control, such as Lloyd’s Banking Group and the Royal Bank of Scotland, are limited to £2,000 in cash, with anything beyond that having to be offered on a deferred basis in shares.
My right hon. Friend the Business Secretary has responded to the High Pay Commission with a series of measures that were announced a couple of weeks ago, and central to those is changing the behaviour and composition of the remuneration committees, so that on the forward pay agreements that they recommend for approval they have binding votes: not the advisory votes that were in place under the Labour Government, but binding votes, so that shareholders really are empowered to make a difference and to instruct directors, who are supposed to have stewardship of their investments in those companies.
That will end the revolving door, whereby executives of one company become non-executives and sit on the remuneration committees of another, and whereby inevitably it is in everybody’s interests constantly to bid up pay in each quoted company. Indeed, they will also have to state how they have involved and consulted employees of what, in many cases, are global companies.
Labour, in its manifesto at the most recent general election, said—I had someone check this for me before the debate—that it would
“strengthen the 2006 Companies Act where necessary”.
I remember that legislation, which, along with the Crossrail Bill, was probably the least popular Standing Committee on which a Member could sit, because it was such a fat Bill and its proceedings went on for so long, but there was nothing in it proposing the regulation of corporate pay. Throughout the previous Government’s 13 years in office, they did little to act on that issue, and despite the huge legislative opportunity that they had in 2006 they did not seek to strengthen shareholder power.
The manifesto went on to state that Labour would strengthen the UK stewardship code for institutional investors so that they would have to declare how they vote on remuneration policies, which in turn should be approved by directors. It was silent on the interests of employees, and the shadow Business Secretary did not say much about that this afternoon, either. He certainly did not commit to having an employee on the board of every company.
It is the behaviour of the banks, not just their remuneration policy, that needs to change. One of the first acts of the coalition Government was to set up the Independent Commission on Banking. We have now had the Vickers report, but in our proceedings on the Financial Services Bill, which received its Second Reading last night, we went through all those issues, so I shall not go through them again today.
We also need a change of behaviour at company annual general meetings, whereby shareholders really engage with the power that they have over their companies. Recently I met the charitable group FairPensions, which is urging institutional investors, the pension fund managers who act on behalf of many of us, our constituents and local authorities, to use their power at company meetings in order to control executive pay and to act as responsible investors.
Some hon. Members may have noticed that I tabled early-day motion 2678 last week, supporting the Move Your Money UK campaign. Mr Speaker, you and I are of roughly the same political generation—although from different points on the spectrum. We would first have become involved in politics during the 1980s. So we would have been students at the time of the Boycott Barclays campaign, and indeed I had a Boycott Barclays poster up on my bedroom wall as a student. I suspect that you did not, Mr Speaker, but people of my generation will remember that the behaviour of consumers can make a real difference to the behaviour of companies, so I urge all hon. Members—I hope this is a cross-party issue—to support my early-day motion and to urge all our constituents as consumers to consider the behaviour of companies when they use their purchasing power as well as when they exercise their power as shareholders.
There has been systemic failure for quite some time, as the Opposition Front Bencher at least acknowledged. There was reckless behaviour by Mr Goodwin, but there was reckless behaviour also in the Cabinet room by the last Labour Government. The coalition Government are clearing up the mess. We are putting in place regulations and legislation to control pay policy, to introduce transparency into the implementation of that policy and to regulate the banks so that we have a sustainable financial services sector and sustainable banks, which are so essential to supporting the businesses that are required to grow our economy.
Margot James (Stourbridge) (Con)
In opening the debate, the shadow Business Secretary stressed the importance of a strong financial sector and called for a new culture, given the high pay and excessive bonuses that we have seen. Many of us on the Government Benches agreed with what he said in that direction and with the overall tone that he struck. He was asked how much money had been given away in bonuses under the last Government. According to my figures, £66 billion was paid out in bank bonuses under the last Government. Much of that was encouraged by the last Government, for the massive tax revenues that it generated, with more than 50% coming back to the Exchequer.
Much has been made of the linkage between businesses and bank lending, but I would dispute that. We need to see much more lending to small businesses, but, as I explained in an intervention, the reason for the current lending issues is not just that the banks will not lend. Opposition Members do businesses a disservice by continuing to promulgate the myth that banks will not lend, because one reason that businesses are reluctant to approach banks is that they think they will be rejected. We must not engage in too much rhetoric, accusing the banks of not lending, when RBS, for example, grants 85% of the loan applications that it receives from small and medium-sized enterprises.
Mr Umunna
First, I accept that the reason there is not as much lending to SMEs as one would expect is not just because of the banks, but because of people’s confidence in the economy—one might argue that the Government’s policies have had an effect on that. Secondly, I pointedly made it clear in my speech that it is not just a question of the banks not getting the money out of the door to robust, profitable businesses; rather, it is a question of their relationship with their business customers in this day and age. Often, people are put on the phone to some person in a regional office who knows nothing about their business and is therefore not in a position to assess the risk properly.
Margot James
First, on the causes of why businesses are not seeking loans to invest, that has much more to do with the eurozone crisis and the global economy in general. For any company seeking to export, there is a general nervousness across the world—not just in the west, but in China and the far east. Secondly, I agree with the hon. Gentleman about banks losing a lot of skills over the past 10 to 20 years in managing their business customers, but I see signs of change. I visited Barclays in Birmingham a couple of months ago, and I sensed the real commitment, along with an upgrading of skills, that that bank—to name one—is making to its business customers.
The Minister of State, Department for Business, Innovation and Skills (Mr Mark Prisk)
We have heard 11 interesting contributions from Back Benchers, although I cannot say that the last contribution was either interesting or, indeed, informed. I should begin by drawing the House’s attention to my entry in the Register of Members’ Financial Interests.
I have to say that the last contribution was in sharp contrast to the more emollient tones of the shadow Secretary of State, the hon. Member for Streatham (Mr Umunna), who actually admitted—I think for the first time from the Dispatch Box—that Labour got it wrong on this issue when it was in government. What is not clear, however, is whether he cleared those remarks with the shadow Chancellor. It seemed that this set of remarks was new to a number of faces on the Back Benches.
We heard very good contributions from my hon. Friends the Members for Halesowen and Rowley Regis (James Morris) and for Nuneaton (Mr Jones) and excellent contributions, too, from my hon. Friends the Members for Bedford (Richard Fuller) and for Stourbridge (Margot James). We heard an interesting contribution from the Chairman of the Select Committee, the hon. Member for West Bromwich West (Mr Bailey), who pointed out that it was my right hon. Friend the Member for Twickenham (Vince Cable)—[Interruption]—who, notwithstanding the shouting and screaming from Labour Members, highlighted the existence of real challenges and problems when his party was in opposition. I am sure that my right hon. Friend will be happy to acknowledge that.
Let me begin by making it clear that this Government have an absolute commitment to addressing excesses in the banking system that were allowed to go unchecked and unregulated for much of the 13 years before we came to office. It was a system in which light-touch regulation and record bonuses were encouraged by a Government who were keen to reap the rewards. Since coming to office, we, as a coalition Government, have made a return to responsible banking a key priority. We have taken concerted action to ensure that, in return for extensive taxpayer support, banks must once again live up to their obligations to support the wider United Kingdom economy.
That is why, as my hon. Friend the Financial Secretary to the Treasury pointed out, we are discarding the discredited tripartite system and implementing the recommendations of the Vickers commission. It is also why we are actively supporting the flow of lending to businesses, especially small businesses, so that they can gain access to the finance that they need if they are to invest and grow. We on these Benches passionately support the entrepreneurs and hard-working small business owners who create the wealth and jobs on which the rest of us rely.
There has been some discussion about the Merlin agreement this evening. Let us be clear about that. Under the terms of the agreement, the five major UK banks committed themselves to making £190 billion of new credit available last year. Of that new lending capacity, £76 billion was dedicated to small and medium-sized enterprises, which would be a 15% increase on the previous year. The latest figures, for the third quarter, show that the banks are broadly on track. At that point banks had lent more than £157 billion to UK businesses, 11% above their implied target, and three—Barclays, Santander and HSBC—have all made recent statements to the effect that they have met their Merlin targets. We await the final figures, but that is good news that we should bear in mind.
Moreover, a report from my Department, to which the motion refers, reveals—although I did not hear this from Labour Members—that three quarters of SME employers are being given the loan or overdraft they request. My hon. Friend the Member for Stourbridge rightly pointed out that it is wrong to suggest—as some Opposition Members do—that no small firm can obtain a loan.
Mr Prisk
I will not give way. The hon. Gentleman spoke for 45 minutes, which meant that Back Benchers did not have a chance to contribute to the debate.
I understand—we understand—that to the 25% of SME employers who do not obtain that loan or overdraft, the fact that 75% do will be no consolation. That is why the Chancellor is taking decisive action to provide some £21 billion, £20 billion of it under the national loan guarantee scheme, which will be available over two years and will allow banks to offer lower-cost lending to smaller businesses. [Interruption.] Notwithstanding the chuntering of Opposition Members, that scheme is supported by the Federation of Small Businesses, the British Chambers of Commerce and the CBI. The details will be made clear in the next few weeks.
Independent Banking Commission Report
Chuka Umunna Excerpts(13 years, 3 months ago)
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Mr Osborne
As I have said, the 2019 back-stop is the considered view of John Vickers and his commission. They have spent an enormous amount of time thinking about this, about trying to get the balance right between getting the rules in place, getting the rules right, and ensuring that they do not damage credit supply in the short term, about which many Members have asked. The report contains other milestones—some of the changes that he wants to see put into place by 2013, for example. John Vickers has done a good piece of work, and given a lot of thought to the issues, and I do not want to second-guess them just hours after he has published his report. We will produce a full, detailed response to the report by the end of the year.
Mr Chuka Umunna (Streatham) (Lab)
The Chancellor has referred to Project Merlin, which is generally regarded as a fairly ineffectual agreement, not least because, according to Bank of England figures, net lending to small and medium-sized enterprises has contracted month on month. Across the House, we can agree that it would be undesirable for politicians to seek directly to run the banks in which we have a public stake, but surely that should not preclude the Chancellor asking United Kingdom Financial Investments Ltd to ensure that the banks change the culture that they exercise towards SMEs. When was the Chancellor’s last discussion with UKFI about that?
Mr Osborne
I talk to UKFI all the time, and one of the things I talk about is ensuring that the banks in which we have a public ownership of shares are meeting their Merlin lending targets. I congratulate Lloyds, which has changed its operations and advertising campaigns and has tried to encourage small business lending. The hon. Gentleman talks about targets, but again there is complete amnesia about the fact that Labour were in government about 18 months ago. The Labour Government introduced net lending targets, which he wants us to introduce, abandoned them after 12 months, after those targets were completely missed, and then said in the House of Commons that they would introduce gross lending targets for two banks, RBS and Lloyds. We have not just stuck with the methodology that they developed, but have extended it to the entire banking system. Before they criticise those trying to clear up the mess, Labour should remember what they did in office.
Finance (No. 3) Bill
Chuka Umunna Excerpts(13 years, 5 months ago)
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Chris Leslie
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.
Mr Chuka Umunna (Streatham) (Lab)
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%?
Chris Leslie
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.
Chris Leslie
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.
Chris Leslie
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.
Mr Hoban
The Finance Bill introduces the bank levy, a permanent tax on banks’ balance sheets that will raise more than £2.5 billion each year. Amendment 13 seeks to reintroduce the one-off bank payroll tax introduced in the previous Parliament, but that would be unnecessary and counterproductive. Amendment 31 seeks to introduce a financial transaction tax, but such a tax would need to be applied globally to prevent the relocation of financial services.
The Government have already set out far-reaching plans for banking reform on regulation, lending, remuneration and tax. That includes the introduction of the bank levy. Both amendments would also place an obligation on the Government to produce a report on how any additional revenues from each tax could be spent and we have already heard many ideas during the debate.
Before I talk about the amendments in detail, we should remind ourselves of the significant contribution to the economy and public finances made by banks operating in the UK. Many hundreds of thousands of jobs across the whole United Kingdom—not just here in London—depend on Britain being a competitive place for financial services. It has been said:
“While the success of the financial sectors in New York and Tokyo has been built largely on supplying large domestic economies, with a smaller domestic economy the success of London has increasingly depended on its global role…The Government recognises that it must ensure that the UK’s tax regime remains competitive”.
The hon. Member for Nottingham East (Chris Leslie) described such an approach as the last refuge of the scoundrel, but the “scoundrel” who made that statement was not me, my right hon. Friend the Chancellor, or the Prime Minister; it was the right hon. Member for Morley and Outwood (Ed Balls), when he was the Treasury Minister responsible for financial services. It is clear that in a short space of time, the Labour party has decided it is no longer important to be globally competitive. That is yet another nail in the coffin of the economic credibility of that party, which voted this morning to scrap the deal obtained by the previous Prime Minister at the G20 summit to increase resources for the IMF.
The financial crisis demonstrated that fundamental reform was needed and that is what the Government are delivering. The Government firmly believe that banks should make a fair contribution to the public finances. In particular, banks should make an additional contribution in respect of the potential risks they pose to the UK financial system and wider economy. Last year, we announced a permanent levy on bank balance sheets, which was implemented from the beginning of this year.
Mr Hoban
Let me make my point and then perhaps the hon. Gentleman can explain the position of his party when it was in government.
In opposition, we made it clear that the UK should introduce, unilaterally if necessary, such a levy, but just weeks before the general election, the previous Government told us that a bank levy would have to be
“coordinated internationally to avoid jeopardising the UK’s competitiveness.”
Where we and our coalition partners have sought to lead international debate, Labour would hang back and let others make up their mind for them.
Mr Umunna
The Minister is extremely fond of harking back to what the previous Government did, but he is in government now and has failed so far to give a single convincing reason to support his position of not adding a bank bonus tax to the levy. Reuters is predicting profits this year of about £51 billion in the sector and there is still an implicit taxpayer subsidy of the sector, so in that context why is it so unreasonable to support the amendment? It simply asks for a review, which is a very reasonable suggestion.
Mr Hoban
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.
Mr Hoban
My hon. Friend points out some of the behavioural impacts of the tax. A Labour Member pointed out earlier the reduction in the proportion of remuneration from bonuses and the increased amount from salaries. That is the kind of behavioural change that happens. Those responses are important. Banks and bankers respond to such changes, but the world has moved on. Unlike when the payroll tax applied, the top rate of income tax is now 50p in the pound. The previous Government told us that they would apply the bonus tax only until changes in remuneration practices were in place, and this Government have taken firm action in that regard.
The Financial Services Authority revised remuneration code of practice sets out detailed rules for pay for firms in the financial services sector. The code ensures that bonuses paid to significant risk-takers are deferred over a number of years and are linked to the performance of the employee and the firm. In addition, significant portions of any bonus will be paid in shares or securities. Those revised rules came into force on 1 January 2011. Let us not forget that under the previous Government, bankers could walk away with the cash in their pocket as soon as the bonus was declared. The rules on bonuses have been toughened up: bonuses are deferred and are paid in shares. The previous Government let the bonus culture rip and taxpayers paid the consequences.
Mr Hoban
At times, I wonder what Opposition Members read; we were clear from the outset that we wanted to toughen up the rules on remuneration. [Interruption.] We were very clear about what we wanted to do. The Opposition should hang their heads in shame about the bonus culture they allowed to perpetuate when they were in government. I remind them that Labour gave Fred Goodwin a knighthood for his services to banking.
We do not need a bank payroll tax. We have demonstrated that the bank levy we have introduced will ensure that banks pay a fair share in relation to the risk they pose to the wider economy. The right actions have been taken.
Amendment 31 was tabled by the hon. Member for Hayes and Harlington (John McDonnell). He is right to highlight the importance of funding international development, on which there is cross-party consensus. The Government agree that we should move to ensure that 0.7% of gross national income should be for aid. The hon. Gentleman is also right to highlight the importance of achieving the millennium development goals. He mentioned talking about education in a school in his constituency. On Friday, I met a group of pupils from Portchester community school who were very much behind the “Send my sister to school” campaign. These are important issues, but we need some discussion about whether the financial transaction tax model offers a stable and efficient mechanism to raise revenue. Such taxes remain the subject of ongoing debate at international level, and the UK continues to take an active role in the discussions.
Oral Answers to Questions
Chuka Umunna Excerpts(13 years, 6 months ago)
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Justine Greening
My hon. Friend is right to refer to the importance of the aviation sector. As he will know, the consultation on reform of air passenger duty closed last Friday, and we have received a number of different representations from stakeholders. He will be aware that this is partly about looking at what we can do to support regional airports, but we certainly do not want to do that at the expense of our other key airports in the south-east.
Mr Chuka Umunna (Streatham) (Lab)
Several figures have been cited about the number of jobs created over the past 12 months. What percentage of those jobs were created before the spending review and are arguably attributable to the last Government, and what percentage have been created since?
Mr Osborne
I am happy to provide the hon. Gentleman with an exact breakdown based around the date of the spending review. What is clear, however, is that we said that we wanted the private sector to lead the recovery and that that was absolutely essential. That is the view of virtually every credible economist and business organisation in the country. He should be celebrating the fact that over 500,000 net new jobs have been created by the private sector in the past year.