Equitable Life
Crispin Blunt Excerpts(8 years, 10 months ago)
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Crispin Blunt (Reigate) (Con)
I declare an interest: I invested in Equitable Life while a special adviser. I cheerfully put 17.5% of my salary into an Equitable Life scheme over four years, when I worked for Malcolm Rifkind, and then watched, after I was elected to this place, as the whole Equitable debacle developed over the next decade or so. But at least I was sharing the pain of many of my constituents—well north of 3,000, according to an estimate given to me. The situation that my hon. Friend the Member for Romsey and Southampton North (Caroline Nokes) laid out is exactly my experience. To start with, there was a substantial lobby, but that dwindled, although there remain some persistent people—I have their letters—who lost hundreds of thousands of pounds, and they come from all classes of annuitants and policyholders.
Tom Tugendhat (Tonbridge and Malling) (Con)
I welcome this debate. Does my hon. Friend agree that some people, like him and my father, did at least have time to make up the shortfall, but that others, including many of my constituents, simply did not have that time? Will he mention the fact that some people did not have the opportunity to recover their losses?
Crispin Blunt
My hon. Friend makes an extremely pertinent point.
On being returned in 2010, I found myself a member of the Government and obliged, at one level, to support their decision to limit the compensation to £1.5 billion. At the time, as the Prisons Minister, and the prisons budget being rather less than the total compensation required, I could understand, in the circumstances, why they decided to limit the overall compensation. I resolved, however, to speak in this debate and to re-examine the letters I sent out defending the Government’s position, and to re-evaluate my position to see whether it was reasonable.
I was much taken with the comments from the hon. Member for West Bromwich West (Mr Bailey), the former Chairman of the Business, Innovation and Skills Committee. This is about confidence in the entire savings system. I can remember Labour’s first Budget in 1997 and the consequences—unreported from the Dispatch Box—of IR35, which saw £5 billion cheerfully lifted from investors in pension funds through a tax on dividends. If a £5 billion change can be made in a Budget, announced not in the House of Commons but by press release, we need to be aware that we are dealing with vast numbers when it comes to pension policy. I tell the Economic Secretary, who is replying to the debate, that I believe we are on the verge of a substantial—and, for me, very welcome—change in pension policy. As part of that, we need to acknowledge the point made by the hon. Member for West Bromwich West that this issue is about confidence in the system as well as fundamental fairness to our constituents.
I congratulate my hon. Friend the Member for Harrow East (Bob Blackman), who introduced the debate so effectively, on securing it. I also congratulate my hon. Friend the Member for Shrewsbury and Atcham (Daniel Kawczynski) on setting up the all-party group in 2006-07 to reinforce the efforts that were already under way. He attempted to corral those efforts, make them more effective and secure from the Conservatives and the Liberal Democrats an undertaking that the issue would be addressed in their manifestos leading into the 2010 election. It is important to highlight that as a simple issue of fairness we need to revisit the sum of £1.5 billion and decide whether or not we have discharged our duty.
Daniel Kawczynski
I just wanted to remind my hon. Friend of my constituent Mr Meinertzhagen, whose living standards are suffering. He is now worried about the consequences for his wife when he departs from this world. It is a real struggle for him, and I hope my hon. Friend will join me in urging the Economic Secretary to find money and set it aside to help these people in desperate situations.
Crispin Blunt
My hon. Friend is entirely right. This is why these artificial divisions—between 31 August 1992 and 1 September 1992—are so unfair on the people involved. My constituent Derek Burton estimates his losses at around £175,000 as a consequence of his having invested before the cut-off date in 1992. That shows the impact on him of the changes that were subsequently made. These are enormous sums of money that have destroyed the planned retirements of thousands of my constituents—an average of 2,000 of every Member’s constituents have been affected.
Frankly, we have to grasp this problem and address it. I hope it can be done through the Budget and through further substantial and welcome changes to pension policy, on which the Chancellor absolutely deserves our support. By those means, he can address this lingering unfairness so that people can be given the confidence to invest in pensions again. The lesson I took from my little episode with Equitable Life was that I was simply not going to undertake any extra investment in pension schemes thereafter.
On the figures, I do not know whether we will get an answer from the Minister on whether £2.7 billion remains the sum required to put this right. In trying to do the mathematics, that figure does not seem to work out precisely to me, given that about £1 billion went to 890,472 policyholders who received only 22.4%. Provision should now be made for us to address this issue.
Maladministration was recognised and a clear recommendation was eventually made by Ann Abraham in her report, after various other people had looked at the problem. I have a lingering sympathy for some of the Equitable Life administrators at the time. The original legal challenge to their policies always struck me as ludicrous. It lost at every conceivable stage until the last one, when there was no possible course of appeal. Provision had not been made, as it should have been, for the possibility that they might lose the action. That was how the maladministration came to be identified in all the reports.
If we—the system—have overseen people not doing their job properly and not protected people who were wholly innocent, including those who were investors before 31 August 1992, it is right that we do our duty —out of fairness to them and to restore confidence in the whole pension system. If people find that they have invested resources other than their house in the biggest single asset they are going to invest in, and encountered circumstances utterly beyond their control, or utterly beyond any reasonable duty of care they would have taken to find out about what they were investing in; and given that Equitable Life was the most reputable pension provider around at that time, we need to put things right. We are now able to afford to compensate these people, and we should be able to do so by continuing significant pension reform to put this right properly and fully.
Peter Heaton-Jones
I give way to my hon. Friend the Member for Worcester (Mr Walker).
Peter Heaton-Jones
I take the hon. Gentleman’s point, but let me return to a point that I made earlier. He refers to the Treasury paying compensation. The Treasury has no money; it is all taxpayers’ money. We need to strike a careful balance. There must be fairness, not only to Equitable Life policyholders but to taxpayers in general, because it is they who will ultimately have to foot the bill for any compensation.
Crispin Blunt
May I briefly make the point that there is a taxpayer interest here? If the savings culture is undermined, the taxpayers’ interests are absolutely at stake. We need people to invest in pensions to ensure that they are not dependent on the taxpayer in their retirement.
Peter Heaton-Jones
That is a good point, and I do not think that it is wholly at odds with the point that I was seeking to make.
I shall not delay the House for much longer. We all recognise that Equitable Life policyholders have found themselves in an impossible position—and, again, I pay tribute to all the work that they have done—but it should also be recognised that asking the taxpayer to provide £2.6 billion of compensation, if that is indeed the figure, is a big ask. Let me say to the Minister that that I acknowledge that balance, and I hope that we can find a way along what is a difficult path. I welcome the Treasury’s assurance that it will entertain all submissions from Members of Parliament, members of EMAG and members of the public, and will keep the matter under careful consideration so that we can resolve it in a way that will satisfy both Equitable Life policyholders and the interests of the wider taxpayer.
Greece
Crispin Blunt Excerpts(9 years, 5 months ago)
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Mr Osborne
Debt sustainability is clearly one of the big issues for the Greek Government, but—and this, I believe, was also true of the discussions that took place in the 1950s—there must also be some agreement on the creditors’ part that economic reforms are in place that will allow the country to grow and thrive in the future. At present, the two sides cannot agree. The Greeks want the restructuring, while the eurozone wants more conditionality, and more evidence of the structural reforms that it believes will help the Greek economy to grow. What we are doing is urging the two sides to try to reach some kind of agreement.
Crispin Blunt (Reigate) (Con)
My right hon. Friend is urging a sustainable solution on our eurozone partners. Is he really saying that if he were a eurozone Finance Minister, he would fancy the task of going to his Parliament to seek authority to throw more good money after bad at the intransigent and unrealistic Government who so unhappily appear to represent the view of the Greek people?
Mr Osborne
I do not want to speculate on how this country would behave if it were a member of the eurozone. Thankfully, that is one of the pressures that our Government do not have to bear. However, this does remind everyone that a country that joins in a currency with other nation states and creates collective institutions will find itself bound by those rules, and will find that some of its unilateral, albeit democratically endorsed, decisions are not necessarily accepted by everyone else.
Oral Answers to Questions
Crispin Blunt Excerpts(9 years, 6 months ago)
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Mr Gauke
On the subject of Chester, unemployment fell over the course of the last Parliament by 49%, which is something I would have expected the hon. Gentleman to welcome. The reality is that we are investing in apprenticeships; we saw 2.2 million people undertake apprenticeships in the previous Parliament, and we will increase that to 3 million in this Parliament.
Crispin Blunt (Reigate) (Con)
Following the crash, the remarkable record of the economy was that unemployment did not rocket up more post-2008 and 2009. Now, in my constituency, it is the labour market that is very tight. I ask the Front-Bench team to focus very hard on improving productivity because that is where the improvement in our economy must now come from.
Oral Answers to Questions
Crispin Blunt Excerpts(10 years, 1 month ago)
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Danny Alexander
The first thing that we are doing is delivering on what we promised to do when we created this Government in the first place, which is to repair the deep damage that the hon. Lady has to admit was done to the economy under her party’s stewardship. We have now got the United Kingdom into a position in which we are creating more jobs than in the whole of the rest of the European Union combined, and we have the strongest growth rates in the developed world. She should welcome that as something that creates opportunities for young people.
Crispin Blunt (Reigate) (Con)
This fiscal consolidation plan will be heavily influenced by the dramatic liberalisation of pensions announced in the Budget, which will be significantly influenced by the success or otherwise of the guidance guarantee that is now being legislated for. Does the Chief Secretary agree with Ros Altmann that the Financial Conduct Authority should ensure that people who do not receive or take the guidance in this new environment are at least asked proper questions about their circumstances, such as about their partner and their health?
Mr Speaker
Order. A question can be wide, at a stretch, but it should not also be over-long.
Taxation of Pensions Bill
Crispin Blunt Excerpts(10 years, 1 month ago)
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Crispin Blunt (Reigate) (Con)
I am obliged to the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson) for her reference to my intervention on Second Reading of the Pensions Schemes Bill. Much of her speech was about the guidance, which is covered in that Bill. Obviously, there is a significant amount of overlap between the two pension Bills.
I represent four of the most significant players in the United Kingdom pensions market: Just Retirement, Legal & General, Partnership, and Fidelity, all of which provide a significant proportion of the jobs in my constituency. As specialist annuity providers, Partnership and Just Retirement have grown like Topsy over the past decade. They are creative and entrepreneurial companies that have found ways of providing different classes of annuitants with significantly enhanced value. The changes that the Bill introduces and that were announced in the Budget caught the whole market by surprise and have led to a particularly challenging six months for these two companies. Understandably, as more options will soon be available, there has been a significant reduction in the number of people buying annuities. Consumers and financial advisers are continuing to assess the best options for individuals as these reforms are developed.
Despite this difficult time, the very reasons that allowed those two companies to succeed so spectacularly over the past decade are the same as those that are enabling them to weather this sudden strategic change in the operating environment. The companies are well-led and fleet-footed and are now in the business of identifying new products to meet the new environment. However, they deserve certainty about the regulatory framework as soon as reasonably practicable so that they can bring new products to the market as soon as possible.
The Budget announcements made earlier this year were the culmination of a drive by both coalition partners towards greater consumer autonomy in the pensions market. For anyone who believes in freedom and responsibility, such a reform can only be right. The paternalistic status quo has long been out of step with a society that is happy with financial self-determination before retirement. Moreover, with annuity rates having dropped significantly over the past two decades, diversification, many hope, may be just what the market needs to invigorate it and produce the most innovative and well-suited options for consumers.
However, the pensions market has long been distorted by a deficit of consumer awareness. The 2012 survey of the Department for Work and Pensions, “Attitudes to Pensions”, found that 49% had no knowledge of the need to annuitise. Financial self-determination is an honourable and desirable goal, but the transition may be very bumpy if people purchasing pension products are unable to approach the open market with the requisite knowledge to plan for their retirement.
The Financial Conduct Authority, in its consultation “CP14/11: Retirement reforms and the guidance guarantee”, has identified that people who make large withdrawals from their defined contribution pension savings are at risk of not understanding the income tax implications of their decisions. Unsurprisingly, most people will be completely unaware that their tax may not be settled until a year after they have accessed their funds through a self-assessment process. There are a number of other equally important decisions that people must make, and if, through inertia or misunderstanding, they make a poor decision, it will be to their and their family’s material and financial detriment.
During the evidence presented to the Pensions Schemes Public Bill Committee last week, a number of experts called on the Financial Conduct Authority to use its existing powers to mandate those firms that hold people’s pensions savings to be required actively to engage with their customers who do not take up the Government’s guidance guarantee and to ask a small number of questions that would prompt them to consider the choices they are making. Hopefully, that will avoid the most common errors that have led to poor consumer outcomes. With current estimates of the guidance uptake veering from 4% to 92%, a range of basic security questions will be a necessity, not a luxury.
The Pensions Schemes Bill will have a major impact on the successful outcome of this legislation and vice versa. These reforms could provide an unhappy example of the costs of liberalisation if consumers are not aware of the freedoms that they now have.
Mr Love
There is a lot of debate in the Committee and on the Floor of the House today about a second line of defence. Would it not be appropriate that when an individual approaches a pension company and asks to take out either some or all of their pension pot, they are asked whether they have received the guidance guarantee? If they have not, they should be referred back to the guarantee before they take an irrevocable decision on their pension.
Crispin Blunt
The hon. Gentleman tempts me down the path of discussing what is in the Pension Schemes Bill, which, although not the subject of today’s debate, is closely linked with the Taxation of Pensions Bill. I presume by his presence that he is on the Committee, as is the hon. Member for Middlesbrough South and East Cleveland (Tom Blenkinsop). I sincerely hope that the Committee will carefully examine this matter. It is subject to a current consultation by the FCA, to which I have submitted my evidence. This is an immensely important issue. To make the reforms in the Bill successful, we have to make a success of the guidance. We will not get it right first time. It will have to be capable of being improved in the light of experience, so that we do not end up with a mis-selling disaster or simply consumers not being informed enough to make appropriate choices.
We are giving people freedom, and with freedom comes responsibility. Sadly, that means that some people will make poor choices. The hon. Member for Edmonton (Mr Love) has spoken about people making poor choices, or taking a holiday; at least, that was the implication behind his remarks. I think taking a holiday is probably a thoroughly good choice, but he and I may differ. His Scottish Presbyterian background may be coming into play there. I will leave that as speculation.
Ian Swales (Redcar) (LD)
The hon. Gentleman raised a point that I had not thought about, which is the tax consequences during payment. Normal annuities are paid out against a pre-determined tax code, and people have their tax deducted at source when they receive their payments. I know this from personal experience. Under the flexible rules, he suggests that the tax will be payable only at the time of self-assessment, much later. Does he believe that providers of these products should be looking at tax deductions at source?
Crispin Blunt
I would concede that this is not an area on which I feel a total authority. Hon. Members who have served on the Pension Schemes Bill Committee and made themselves authorities in this area must also take seriously the advice of experts and industry to address precisely the kind of question that my hon. Friend raises. We cannot afford to leave consumers adrift while we make the transition from a highly regulated, paternalistic and rather depressingly inefficient market to one that provides much better returns and is much more competitive, but which needs better informed consumers to drive it.
Chris Evans (Islwyn) (Lab/Co-op)
Having worked in the industry myself, I share many of the hon. Gentleman’s frustrations. Does he believe that half an hour of independent guidance is enough for people on the journey of managing a pension pot that has to last them 30 years? How does he see that relationship developing so that they make the right decisions along that 30-year journey?
Crispin Blunt
Obviously, the precise mechanism that ends up being set up by the FCA is immensely important. If it is as the hon. Gentleman characterises, and it does not lead people to come to a proper assessment of their situation, we will be left where we are now. Companies such as Partnership and Just Retirement, operating in the annuities industry, have been brilliantly successful because when people examine their situation it usually makes sense for them to move to such companies when they annuitise, rather than stay with their existing provider. The only problem is that people have been subject to consumer inertia and have not been aware that at that point they should be making the decision in the current market. The great thing about this liberalising reform, and the anxiety shared across the House to make sure that the guidance works, is that we will now be waking people up to the opportunities presented to them. If we have many tens of thousands of pounds in our retirement fund, a half-hour chat is probably insufficient. Many people will have hundreds of thousands of pounds available to them after a lifetime of saving into a pension fund, and it will pay them to take serious, proper, independent advice. They will need to pay for that, but it will represent serious value for money if they get proper advice. If the guidance can push people in that direction, to properly regulated and properly informed independent financial advisers, we will have properly informed consumers making proper choices.
The Financial Secretary and the Treasury will need to assure themselves that the FCA is alert to the needs of all consumers with direct-contribution pension benefits ahead of April 2015, and ensure that their delivery is closely monitored as these important reforms are made. As I said, we will not get this right first time, and whatever system is set up will need the capacity to improve as we learn how to improve the capacity of consumers to take informed decisions.
Additionally, the companies in my constituency continue to be concerned that the regulatory rules affecting a number of key changes in the Bill are still not clear. The Association of British Insurers is discussing these points with the Government and the FCA, but without clarity soon there is a risk of some customers not being able to access flexibility and there could be an uncertain environment and an uneven playing field between different types of product and providers. This is not solely the role of the FCA. It requires coherent and achievable measures from the Treasury, Her Majesty’s Revenue and Customs, the Department for Work and Pensions, the FCA and the Pensions Regulator.
For instance, the regulatory position on accessing a pension pot in one lump sum, whether through flexi-access drawdown, or an uncrystallised funds pension lump sum—I am grateful to the Financial Secretary for UFPLS. I had a go at “golden annuity uncrystallised kapital enhancement” fund, a GAUKE, which would rely on “capital” being spelled as in “Das Kapital”, which may mean it loses some of its attraction, but I guess we will have to settle for UFPLS. I am sorry that the imagination of Her Majesty’s Treasury officials was not able to produce a real GAUKE for him, to leave his impact on these highly important, liberalising measures for all time.
To return to the substantive point, the regulatory position around those two funds remains unclear, making it very difficult for providers to plan and develop requisite systems. This is despite taking a pension pot in this way being a key expectation raised as a result of the Budget reforms. Indeed, the whole regulatory regime around the uncrystallised funds pension lump sum route, which forms the basis of the Government’s pension bank account analogy, has yet to be resolved. In addition, there could be gaps in regulation between contract-based and trust-based schemes in two areas: how drawdown in trust-based schemes will be regulated, as well as protection for customers and expectations of providers if a customer wants to transfer out of a defined-benefit scheme after receiving advice not to do so.
My constituents welcomed the sensible reduction of the 55% tax charge on death, which the ABI had previously asked the Government to consider, which overtly conflicted with the wider Government policy of making pension saving more popular by giving people more options on how to use their retirement savings. However, without further clarification it creates an advantage for drawdown customers over annuity customers, which will change behaviour. To ensure that the policy is not skewed against income, tax on pension payments to a beneficiary after the customer’s death must be treated equally, whether paid through an annuity or drawdown, as income or as a lump sum.
I want to use the occasion of the Second Reading of this rather technical Bill, which in concert with the Pension Schemes Bill is a profoundly liberalising measure, to draw attention to other associated reforms that are interdependent. Our country has an obsession with investing in property, and there are vast reserves of wealth tied up in household equity. We face a growing crisis in our ability to provide decently for a rapidly growing older population. Failure to enable the equity release industry to grow in a competitive way to produce value-for-money products that look after the interests of the elderly and their families, rather than those of the estate agency industry, when we force people to realise their assets by expensively selling their homes when they do not need to do so and when they deserve stability in their lives with regard to their homes, will be critical to the well-being of every family in this country.
Last year, I led a delegation from the European equity release industry to lobby the European Parliament, the European Commission and the Council of Ministers, to seek changes in the trialogue stage of Solvency II to protect this industry. Under the leadership of my right hon. Friend the Member for Tunbridge Wells (Greg Clark), then the Paymaster General, the British team in Brussels helped to secure some useful space in the interpreting recitals to Solvency II that would help to ensure that the capitalisation demands placed on the equity release industry are significantly in the hands of national regulators. That is immensely important to this Bill, because the successful advance of the equity release industry and the successful development of freedom around pension provision go hand in hand. That relies on a sensible interpretation of the European Union’s Solvency II regime.
I am profoundly concerned that the hard-won space to enable the British equity release industry to advance, achieved by Ministers and their officials, alongside work done by the Equity Release Council, under the chairmanship of our former colleague Nigel Waterson, will, in the classic tradition of British gold-plating of European regulations and directives, be entirely undone by the implementation and regulation imposed by the FCA.
The Economic Secretary has assured me that the FCA is under thoroughly sensible and business-like leadership, and I believe that is the case, not least because last night I met the splendid Robert Taylor, who earlier this year became an excellent addition to the FCA’s senior leadership team. However, I have to say to the Financial Secretary that there are regrettable early signs, as the policy is being developed, that the overriding need to advance the equity release industry to support the reforms being implemented in the Bill, and unrealistic proposals around the matching adjustment that would apply to property as an asset, could seriously hamper the necessary growth of that industry.
If the FCA persists in its unnecessary programme of gold-plating, it will be all of us who have to pick up the bill, and it will be a profound missed opportunity for the United Kingdom, and not only for our citizens; it will be a missed opportunity for the industry to advance around the world, as many of our financial services industries have done, to the immense benefit of the people of the United Kingdom.
I joined the overwhelming tide of opinion that identified that measure as one of the most profound and welcome changes being made by this Administration. The Chancellor of the Exchequer is rightly winning the admiration of his fellow Finance Ministers for the remarkable transformation of the British economy under his leadership. That measure will be a profound part of his and his Treasury colleagues’ legacy. It remains up to them to ensure that it is delivered effectively in detail so that it can be an unalloyed adornment to their golden record.
Priti Patel
I am grateful for that clarification. There is extensive support from the industry. I pay tribute to the industry for the way it has worked with us through the consultation to bring the changes together in such a constructive and supportive way.
Crispin Blunt
On that point, two companies in my constituency, Partnership and Just Retirement, are specialist annuity providers and will be significantly affected. They contributed to the consultation and I know that the Government moved in response to that. I am grateful to the Minister and her officials for the attention they paid in the consultation process.
Priti Patel
I thank my hon. Friend for acknowledging that work and for his thoughtful contribution. He has many pension providers in his constituency. Those insights have helped to inform the debate and shape the Bill.
The aim of guidance is to empower consumers to make informed and confident decisions on how to use their pension savings in retirement. Information alone is not enough to change consumer behaviour. The Government are committed to maximising awareness of the guidance service. Key to that will be the regulatory requirements on providers and schemes to signpost to guidance at key points when individuals are trying to access their pension pot. In its recent consultation on the changes surrounding new pension flexibilities, the FCA has been clear about requiring genuine signposting, including rules that ensure firms cannot circumvent consumers’ right to guidance. An essential part of the development of the guidance will be determining what engages consumers effectively. The Government are assessing engagement and take-up rates, and testing different engagement strategies informed by behavioural insight teams as part of piloting work beginning this autumn. Again, this is about getting it right. My hon. Friend the Member for Redcar (Ian Swales) made an important point about that. We are getting one bite of the cherry and we need to make sure we get it right.
Cyprus
Crispin Blunt Excerpts(11 years, 9 months ago)
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Greg Clark
Yes, that is the intention. Clearly, if the family of a serving member of the armed forces has to relocate to Cyprus and maintain a bank account for everyday living expenses, it seems reasonable to include that in the proposed compensation arrangements. That seems to be the just thing to do.
Mr Crispin Blunt (Reigate) (Con)
What is the Minister’s assessment of the exposure of London financial markets to the potential crisis that may follow from this?
Infrastructure (Financial Assistance) Bill
Crispin Blunt Excerpts(12 years, 2 months ago)
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Mr Redwood
My concern about this Bill is with the definitions and the amount of money involved. I am obviously very much in favour of more productive infrastructure projects going ahead as quickly as possible. There may well be utility in facilitating the Government to make guarantees, support or indemnities available at a time when the banking system is still not functioning well and it is difficult getting these things financed privately in the way we normally like. However, I start from the proposition that what we really need to be doing is generating a lot more freestanding private sector investment projects. It would be better if we took stronger and faster action to remedy the banking problems that lie underneath the problems we face in getting these things financed.
I am concerned that the wide-ranging powers in clause 1 may lead to a big increase in public spending, which would damage the Government’s fiscal targets. A lot of time and energy has been expended by Governments on reducing capital programmes to try to get public spending down to levels thought to be more compatible with reality and markets. We want to avoid this Bill becoming a way of undoing all the hard work that has been done to try to get the deficit down, at a time when this Government strongly believe that deficit reduction is crucial. The outgoing Government actually enacted legislation committing themselves to halving the deficit over the lifetime of this Parliament.
The definition of “infrastructure” in clause 1(2) is wide ranging. I thought that the type of infrastructure we had in mind for this Bill was that in subsection 2(a), which states that infrastructure is about “water, electricity, gas, telecommunications”. Those services are all provided by the private sector with charges to customers, so there is a flow of revenue that can remunerate the capital. If those projects are held up because of banking difficulties, I have every wish to encourage the Minister, newly in his job—I give him my congratulations—to expedite them. One hopes that the Government would be properly rewarded for the indemnities and the guarantees, or that they would not be necessary in the fullness of time, and so the taxpayer would not lose by this process. I am happy with that provision, which I thought was the thrust of the Bill.
However, subsection (2) also provides for mixed projects and entirely public sector projects. It includes mixed projects in the form of railway facilities. Railways are extremely heavily subsidised, and any new project is likely to require many years of future subsidy, because such projects do not normally reward the railway operator or the taxpayer sufficiently from the fare revenue. We therefore need to consider, for any one of these projects, the medium-term and long-term implications of cash outflows from the public sector, as well as the private sector revenues. Those things cause difficulty in the evaluation, as we have found recently through one of the franchise problems.
Subsection (2) also makes provision in respect of areas where spending must entirely be an expense for the public sector—I assume that we are not envisaging court or prison facilities having paying guests who would contribute towards the costs, so this money will be entirely expended by the public sector.
Mr Crispin Blunt (Reigate) (Con)
I return to an argument about prisons that I made on Second Reading. New prisons cost substantially less to run per place than old prisons and can better develop wider policy objectives—for example, on rehabilitation and work in prisons. When debating the Bill, reference should be made to the spending on prisons that would come from the Ministry of Justice’s delegated expenditure limit. This approach would enable the capital expenditure to happen now, in order to take the savings later.
Mr Redwood
That is a helpful contribution, but it shows the dangers of this clause, because it demonstrates that if these projects are not properly evaluated they could be more expensive overall. My hon. Friend has recent experience as Minister with responsibility for prisons and he is saying that in the short term they will definitely be dearer, because the state will have a big cash outflow in order to buy the new prison. It will take time to close down the old one and find some alternative use for it, and that process might not produce anything like the amount of money that the new prison costs. He is arguing, with his former brief in mind, that this may still represent a good bargain for the taxpayer, but when we come to account for it, we will have to account for the fact that a lot more has been spent in the first couple of years; there may be benefits for Governments to come if, as he hopes, the thing is cheaper and better in the longer term.
In debating this clause, we need to unpack the three types of project we are talking about. The first is a genuine private sector project, where we hope that there will be no ultimate call on the taxpayer and it may just involve a facilitation guarantee that will be properly rewarded. The second is a mixed project, where a lot of accounting has to be done—as the Department for Transport is discovering, such projects are difficult to evaluate. The third is the pure public sector project, where we need to go into the departmental budget. So I hope that the Minister will give me some reassurances about this.
Mr Blunt
The thrust of my speech will reinforce the remarks made by the hon. Member for Hayes and Harlington (John McDonnell) and my right hon. Friend the Member for Wokingham (Mr Redwood) about the reassurance we should receive about the possibilities opened up by the Bill. The mechanism I have chosen to secure that reassurance is to table an amendment that would delete the reference to housing. I have no intention of pressing it to a Division; I am merely seeking clarity on what we want to achieve with the Bill.
On Second Reading, the Opposition spokesman said he thought that housing was infrastructure, but I am afraid that I do not—neither does the “Oxford Dictionary of Economics”, nor do The Economist or the Government in their 2011 national infrastructure plan. That does not mean, however, that I do not think that investment in housing is essential or necessary, which was the conclusion slightly unfairly drawn by the hon. Member for Hayes and Harlington on Second Reading. Given his interest in criminal justice, I was somewhat surprised that he then juxtaposed the need for decent prison facilities—
Mr Blunt
I am extremely grateful to the hon. Gentleman for his customary self-criticism and generosity.
The Minister must give us the necessary clarity. I note that the right hon. Member for Greenwich and Woolwich (Mr Raynsford) has tabled an amendment on housing schemes that would add the words “of national significance”—or words to that effect. It is at that point that alarm bells start ringing for me, as the Member for Reigate, a constituency wholly within the metropolitan green belt. We have had a significant increase in housing, particularly through infill but also through new housing schemes that were agreed and supported by the local authority, and there has been development in parts of Redhill, but that has actually led to a shortage of infrastructure to support the people in that housing.
We desperately need two new primary schools locally, and then there is the small matter of the M23 never being finished. In these circumstances, when we are looking for capital schemes, it might be rather nice if the M23, several decades later, was finally finished properly where it joins the A23. In addition to the schemes that the Government will come forward with, which I anticipate will be announced in the expenditure statement, I hope that we can begin to look at some of the schemes that have been around for a long time and that these funding mechanisms will help to enable expenditure on them to take place.
I am seeking the same level of reassurance that my right hon. Friend the Member for Wokingham seeks. I have the same implicit trust that he has in the ability of the Economic Secretary and the team of Treasury Ministers to manage these things satisfactorily, but Parliament is owed proper accountability on this.
I am concerned that we will find housing schemes, particularly those of national significance, being imposed in the way they were under previous regional development strategies, with housing numbers simply being cascaded down from Whitehall to the regions, to the counties and then to local authorities, such as mine, in a way that leaves the borough councillors, as owners of the planning policy, completely unable to do anything other than mitigate the consequences. They have never been in the position that we, as a localist Government, want them to be in, in which they can judge between the economic and social need for housing locally and the environmental consequences of such development. Those are the balances that local authorities are there to draw.
The Bill will suddenly enable a substantially greater amount of new expenditure to take place, but where is the link with the rhetoric about planning policy? I just want to raise that concern, as I did on Second Reading. I do not want the financial provisions set out in the Bill to be combined with planning policy debates that take place elsewhere, and then suddenly find that in constituencies such as mine the powers of local representatives are being overridden in some rush to develop housing, which by no stretch of the imagination is infrastructure in the proper sense of the word.
Mark Field
Does my hon. Friend agree that the experience of the past 15 years is that there has been very little cascading down, despite all the intentions to build new housing? Is he perhaps becoming over-concerned that the inclusion of housing as one of the infrastructure heads might mean that only a number of housing schemes—relatively small ones; not necessarily national housing schemes—become the shovel-ready schemes that the Treasury is looking to encourage given that some of the other heads might mean that considerably more time is required before anything is built?
Mr Blunt
That is fine, but the borough councillors of Reigate of Banstead, as the planning authority, have a mandate from their local electors and they are perfectly capable of making decisions about the requirements for housing in the area and to weigh up the competing factors. That is the mandate they enjoy from local people and, as far as I am concerned, there is no need for the view that the gentleman in Whitehall knows best. If there is going to be a wider economic case for building, it needs to be made with great clarity. If that needs to be done with infrastructure of major national significance, there are bound to be occasions when local interests will have to be overridden in the wider national interest. As far as housing is concerned, the arguments are certainly significantly weaker in that regard than they are for actual national infrastructure, the benefits of which we will enjoy for decades to come. If we have too much jerry-built housing, we will then have to live with the environmental consequences for generations.
Mr Raynsford
I draw attention to the interests declared in my entry in the register.
I disagree with the hon. Member for Reigate (Mr Blunt), but I do not intend to engage in a debate with him. I will simply say that I think he is in for a big disappointment and that he clearly did not listen to the statement that the Secretary of State for Communities and Local Government made about changes to the planning system that will allow him to refer a whole series of matters to the Planning Inspectorate when he does not agree with a local council’s decision. I am afraid that that is where the Government have got to in relation to localism. However, I do not intend to enter into that debate.
I entirely understand why the hon. Member for Reigate misinterpreted the effect of amendment 2, because the amendment paper gives the impression that it was designed to refer only to housing of “national significance”. It was not. It is simply that housing is the last item prior to the next clause. My reference to “national significance” applies to all the items, including roads, sewers and all the rest, as well as housing. The purpose of the amendment, which is what I will focus on, is to limit the impact of the definition of the Bill to schemes of national significance.
Mr Blunt
I am extremely grateful to the right hon. Gentleman for that clarification following my inability to read his amendment properly. On the planning point, and with respect to his long-established expertise and experience in this area, if he thinks that green-belt constituencies such as mine are liable to be affected under the changes he has identified, I am in the market for his advice.
Mr Raynsford
I said that I did not intend to engage in a debate on that subject. I believe that we need a great deal more housing in this country, but I will not engage with the hon. Gentleman in a debate about his constituency, which he knows much better than I do, and I certainly would not advocate extensive building on the green belt, which would be entirely inappropriate. I was simply drawing attention to the fact that the Secretary of State’s recent decision on planning, which came a mere three or four months after the national planning policy framework was put in place, withdrew many of the original localist hopes about allowing decisions to rest with the local authority and made it clear that he would refer items over the local authority’s head to the Planning Inspectorate. To me, that is not localism, but let us leave it there.
I tabled the amendments simply to try to get clarity and focus on the uses and application of the Bill. As drafted, it is incredibly broad. I do not object to the definition set out in clause 1(2), but the definition in clause 1(3) states:
‘“Provision” includes acquisition, design, construction, conversion, improvement, operation and repair.’
As the right hon. Member for Wokingham (Mr Redwood) pointed out, subsection (4) defines financial assistance as covering a whole range of activities, including
“loans, guarantees or indemnities, or any other kind of financial assistance”.
In theory at least, that definition would allow the Government to offer a guarantee literally on the repair of a door in a school or prison. Although that work might be entirely necessary and desirable, it is clearly nonsense for the provisions in this Bill, which are designed to allow major infrastructure schemes that are stalled for financial reasons to proceed. That is the purpose of the Bill.
Sajid Javid
That is a good question. It reminds me that I cannot remember any Member from Scotland or Northern Ireland being present during our lengthy debate on Second Reading. The recess was about to start, so perhaps they though it was a good opportunity to take a longer break. Let me be clear: this is a United Kingdom Government Bill. It is based on macro-economic policy, which is a reserved power for the United Kingdom Government, and takes advantage of the credit-worthiness of the United Kingdom Government. Members discussed the referendum on Scottish independence earlier, and this scheme is a great example of the strength of the United Kingdom when it works together. If we asked project sponsors in Scotland whether they would prefer a United Kingdom Government guarantee or a Scottish Government guarantee, I know which one they would pick. On deciding how those guarantees are used in devolved areas such as Scotland, the United Kingdom Government would work closely with their counterparts in the Scottish Executive, but the final decision would be for the United Kingdom Government.
I do not want to say too much about amendment 10, tabled by the hon. Member for Hayes and Harlington (John McDonnell), because the issue has come up a number of times, but I will point out that international connectivity is an important issue for overall economic growth. This Government believe that maintaining the UK’s status as a leading global aviation hub is fundamental to our long-term international competitiveness, but we are also mindful of the need to take full account of the social, environmental and other impacts of any expansion in airport capacity. That is why we set up the independent commission under Sir Howard Davies, which will issue its final report in the summer of 2015. Any decision on whether to support any of that report’s recommendations will be taken by the next Government. In any case, the coalition agreement is clear on this issue. That represents the Government’s position clearly, so I do not think there is any need for the amendment and ask the hon. Gentleman not to press it..
Amendment 4 was tabled by my hon. Friend the Member for Reigate (Mr Blunt), who said that he raised the issue on Second Reading. I remember discussing it with him at the time and afterwards. The Government believe that the definition of “infrastructure” should be broad enough to include housing, because housing and rented homes are a fundamental part of supporting a young dynamic work force and millions of other people, as well as of increasing the overall supply of housing. Including housing in the Bill’s non-exhaustive, illustrative list makes clear our intention to introduce major investment in the UK and increase the number of houses being built and occupied.
I reassure my hon. Friend, however, on one of his key points. In no way does this deal with planning issues or take away planning authority from local authorities. He should be reassured that the Localism Act 2011 is unaffected —there is no change to that—and the Government have no plans under this Bill to impose housing on any local authority with different views. This is about providing financial support for housing projects that meet the Bill’s criteria.
Sajid Javid
I hope that I have reassured my hon. Friend on his key point. He talked about his constituency and how green it is.
Sajid Javid
If I have not been clear enough, I apologise to my hon. Friend. Perhaps I could write to him later in order to be clearer, or even have a meeting with him on this particular issue.
I will respond to amendments 1 and 2 together. The right hon. Member for Greenwich and Woolwich (Mr Raynsford) was right to point out that many Members seem to have misunderstood his proposal to add the words “national significance”, by linking them to a definition of housing. I get his point. It is fair to take both amendments together, because he is considering the overall definition of infrastructure and trying to make it more inclusive. The amendments are, however, unnecessary and I will explain why. The Bill’s purpose is to allow the Treasury, or the Secretary of State with the Treasury’s consent, to incur expenditure in support of the various infrastructure projects. Members will be aware that “infrastructure” has a plain English meaning, namely the physical facilities and installations needed for the functioning of a community or a society, such as transportation and communication systems, water and energy facilities, and public institutions, including housing, hospitals, schools and universities.
Infrastructure (Financial Assistance) Bill
Crispin Blunt Excerpts(12 years, 3 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mr Crispin Blunt (Reigate) (Con)
I fear I shall use them, Mr Deputy Speaker.
I am grateful for the welcome I received from my hon. Friend the Member for Northampton South (Mr Binley), who said how glad he was to see me. It has taken me 15 years to arrive on the Government Back Benches and this is my first speech as a Back Bencher for more than eight years. I enjoyed the fact that the first constituent to seek my help after I was relieved of my responsibilities as one of Her Majesty’s Ministers was a gentleman who needed assistance at an employment tribunal in a case of unfair dismissal. I was able to look him squarely in the eye and tell him that he had to take whatever he got from the employment tribunal, and once that was done, he must put matters behind him and get on with the rest of his career and his life. I have every intention of doing that, and enjoying the freedoms of the Back Benches.
It was interesting to follow the Gatling gun-like delivery of the shadow Chief Secretary, the hon. Member for Leeds West (Rachel Reeves), who rattled through her speech. When I sat on the Opposition Benches, I heard similar speeches from colleagues about Government announcements that were made but not immediately delivered. When they relate to infrastructure, things take a tiresome amount of time.
I wondered about the economic analysis that underlay the hon. Lady’s critique. What kind of economic la-la land are the Opposition living in that they think the financial markets would have confidence in underwriting the Government’s debt if it continued to be managed by Labour? They had got us into the most appalling trouble by May 2010. It took the formation of the coalition and the urgent need for all Ministers to attend to their departmental expenditure to drive down debt so that the Chief Secretary could deliver credibility to the financial markets and our nation could continue to enjoy borrowing rates that are at an historic low. The difference between us is that if Labour had been in charge, we should probably have been enjoying borrowing rates something like those of Spain, which would be costing us £40 billion a year in the extra interest charges we would have to pay on the monumental national debt that was built up under the previous Government.
Having achieved a level of market confidence, it is absolutely proper that we now look to capital expenditure. That is why in principle I welcome the Bill and the fact that under the so-called Baldwin convention the Government are seeking specific authority for capital expenditure of this type. However, better explanations are required of the detail.
Hugh Bayley (York Central) (Lab)
If business confidence in the previous Labour Government was as bad as the hon. Gentleman suggests, it would have been reflected in interest rates, yet in fact when his party came to power we had interest rates at a record low. I acknowledge that they have continued at that level, but it was a record low that his party and the coalition Government inherited from Labour.
Mr Blunt
That would be fine if the markets had not entirely discounted the prospect of the hon. Gentleman’s party being retained in office in 2010. It was perfectly clear that Labour was being sent firmly through the exit door. I assure the hon. Gentleman that if the markets felt there was any chance of the former Prime Minister and his henchmen remaining in office, we should have faced a quite different picture.
Having just held a Ministry of Justice portfolio, I turn to the subject of prisons, which are mentioned in the Bill as a potential source for capital expenditure. There is a case for measures that enable capital expenditure on prisons. There is a very strong case, which I shall continue to press from the Back Benches, for building new prisons, not to increase the number of prison places but to modernise the prison estate and make it fit to deliver rehabilitation, work and security at a sensible, affordable price in a prison infrastructure for the 21st century.
Oakwood prison offers an example. It was built with running costs of more than £10,000 a prison place less than other category C training prisons of its type. With capital expenditure at about £100,000 per prison place, one can easily see the rough order of magnitude in a 10% return on that scale of investment. If we then take into account the fact that we could sell off the old prison sites, that we will not have to deal with the accumulated maintenance deficit in the older parts of the prison estate and that we will get much better implementation of policy in prisons that are built with work, security and rehabilitation in mind, we can see that the case for including prisons in the Bill is extremely strong.
I am, and will remain, an advocate of wholesale reinvestment in our prison estate. It means new prisons that will be more efficient and older ones closing so that we end up with the estate we should have for the 21st century. There is currently a competition process for nine prisons, the second such round of competitions—eight are currently in the public sector and one is in the private sector. All the bids I have seen, from both the public and private sectors, show the enormous benefit of competition in coming forward with better ideas on how to run our prisons.
At this point it would be appropriate to pay tribute to the officials in the Ministry of Justice and to Michael Spurr and all the people at the National Offender Management Service with whom I have had the privilege of working over the past two and a half years. I put on record my gratitude to them and, as prisons are in the Bill, to Peter McParlin, chairman of the Prison Officers Association, the biggest trade union representative in the Prison Service. In an era of considerable change in the service, I commend the constructive relationship and dialogue I had with him and with other union officials and staff, including those from the National Association of Probation Officers.
I turn from my former responsibilities to the application of the Bill to my constituents. Reigate plays host to some serious national infrastructure. We have two prisons, but we are adjacent to Gatwick airport, the M25 runs through the middle of the constituency, and the London to Brighton main line is another key piece of infrastructure. The constituency has been under constant developmental pressure throughout my time as Member of Parliament. The borough of Reigate and Banstead has more than met the housing targets imposed by the previous Administration. It is not housing we are short of; it is infrastructure. For example, we are woefully short of primary school places, the M23 has yet to be finished and brought to an end at the Hooley interchange, and there needs to be a reorientation of the railway line that cuts across the London to Brighton main line and runs between Guildford and Tonbridge.
I share the criticism of others about the delay in the decision over the future of airport capacity in the United Kingdom. For me, the answer is blindingly obvious: we need an airport in an estuary that can operate 24 hours a day and that has the capacity to deal with the primary needs of the United Kingdom, which is to have a proper hub airport. That has been fairly obvious since people were looking at Maplin Sands about 50 years ago. Frankly, it is about time we got on and made the decision. I seriously regret its being put off for another three years.
I will conclude by expressing my concern about housing appearing as infrastructure in the Bill. I do not think that housing is infrastructure. The financing of housing should come from other mechanisms. I hope that my right hon. and hon. Friends will understand my concern about housing appearing in the Bill in conjunction with the Chancellor’s remarks about the green belt and the potential threat to it. I will be examining the Bill very carefully.
Hazel Blears (Salford and Eccles) (Lab)
It is a pleasure to follow the hon. Member for Weaver Vale (Graham Evans). I thought the beginning of his speech was unusually partisan. He is normally a man who seeks consensus, and I hope that for the benefit of the north-west region we can agree today about what is important.
Members of all parties welcome the Bill, but it is frankly too little and too late, to reformulate what is now an established mantra. It is the product of two pretty much wasted years. There has not just been wasted investment, which could have started to move the country forward, but the result of the delay has been far too many wasted lives, particularly in my constituency and among young people. I hope that the Bill will not be a mirage, as the regional growth fund has been—I will come to that a little later.
The Chancellor can call the Bill plan A, plan A-plus or plan A-plus-plus, and we can call it plan B—I do not really care. However, it shows real acknowledgment by the Government that cuts alone will not get us where we need to be so that our economy can start to fire, people can be employed and we can produce the growth that our country so desperately needs. It is too little, too late, but it is certainly welcome.
The reality of our economy is stark. It shrank by 0.5% in the second quarter, we are back in recession and growth has flatlined for the past two years under the coalition. In the north-west, unemployment was more than 9% between April and June. Only in the north-east and Yorkshire is the figure higher. Employment has to be our top priority, because we are in danger of seeing another lost generation of people who cannot get into work. Long-term unemployment is at a 16-year high and the number of people working part time has gone up by 2% in the past year. Many people are desperate for full-time work but simply cannot find it. In my constituency, 2,350 young people are currently unemployed, of whom 1,500 have been unemployed for up to six months, nearly 500 for between six and 12 months and 360 for a year or more. We all know from our previous experience what happens when a generation feels that it has no hope for the future. We have seen the impact that it has on our communities, so we need to get moving.
The regional growth fund, which was heralded as something that would provide investment in infrastructure and jobs, particularly in the north-west, has been an absolute disaster. It simply has not worked. After two years, only 88 of the 236 offers of funding—a third—have been finalised, and just £60 million out of what was going to be £1.5 billion has got to the front line. Some of the projects carried a cost of more than £200,000 for each additional job created. In short, the scheme has been too expensive and too lengthy, and the National Audit Office has said that the administration of it has been pretty much a disaster. If this infrastructure programme has any of the same qualities, it will not achieve what the Government, and certainly the Opposition, want it to.
Where should the Government focus their support? Certain areas are crying out for attention. I disagree with the hon. Member for Reigate (Mr Blunt), because I think housing is a key part of our infrastructure. In Greater Manchester we have 100,000 people waiting for homes, and we have 25,000 empty homes, including 6,000 in Salford. I do not just want new build; I want us to be able to refurbish those homes, which people are desperate to occupy. The sooner we can do that, the better.
Let us be careful, however. Reforms to the planning system have been discussed over the past few weeks, but we have to build not just houses but communities. We have seen what happens when we build houses on barren estates without putting in place schools, shops and leisure facilities. The use of section 106 agreements will be reduced, and we will not have the community infrastructure levy. I am seriously worried that we will just have a lot of boxes, which do not make communities. That must be taken on board in the changes to the planning system.
Mr Blunt
I have heard the remarks that the right hon. Lady and the right hon. Member for Wentworth and Dearne (John Healey) have made about housing, but housing is not infrastructure in any strict sense of the word. Infrastructure is there to support the people who live in that housing and the businesses in which they work. Does she accept that if we bring housing into the definition of infrastructure, we reduce that definition ad absurdum? I completely accept her points about the importance of building communities, but that should be addressed in a proper housing and planning strategy. Infrastructure, in a proper sense of the word, is different.
Hazel Blears
I understand the hon. Gentleman’s concern about his local green belt. If he can encourage his party’s Front Benchers to invest more in brownfield sites in the north-west, where we can build communities, I will take on his housing allocation tomorrow to ensure that we can house our people.